Sage advice

October 13, 2022

Congratulations, you’ve survived another week as an investor in 2022! A week where we have seen positive and minus +2% moves in equity markets within the same day. Is anyone else just a bit tired of this?! Much of this week’s excitement centered around – you guessed it – inflation. You can read more on that topic in this week’s Client Question segment here

I wanted to dedicate this column to some helpful advice I read this week from an investor I respect and admire. Every quarter, the mutual fund managers that we follow and/or invest with publish quarterly commentaries and host conference calls. These present great learning opportunities from some of the best in the business.

One such manager I always enjoy hearing from is Bill Nygren of the Oakmark Funds. Bill wrote a very thoughtful commentary, centered around a client email he received. This investor wrote Bill, saying she was retired and was now worried about running out of money.

You can read the full commentary here and I suggest that you do. He shared a lot of interesting analysis about the uniqueness of this bear market and several reasons to be hopeful for the future which are worthwhile reads.

However, it was his ending advice to this retiree that was very reassuring and helpful to me during another whipsaw week. Bill wrote:

To the retiree who wrote to me: you are right to be concerned about your portfolio losses, but how you deal with that concern will influence how permanent your loss becomes. Our advice is pretty old-fashioned:

  1. If you wake up at night thinking about your investment portfolio, you should reduce your risk.
  2. Defer discretionary spending until markets have recovered.
  3. Don’t listen to media pundits’ advice on market timing.
  4. Asset allocation matters, and investing in both stocks and bonds helps control risk.
  5. Market volatility creates an opportunity to rebalance to your target asset allocation.
  6. When valuation spreads are above normal, look to add value by stock picking.
  7. Investors hurt themselves by selling after declines and buying after increases. Do the opposite.

Well said Bill. Thanks for the reminders.

Onward we go,

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