Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.
Why hasn’t my account performed in line with the S&P 500? Performance reviews have gone out for the second quarter and many of you may be wondering just that. We remember similar questions from 1999 and 2000 as technology led the index higher and higher. This time the index is being led by healthcare stocks, especially the riskiest companies in that sector.
Here is the bottom line: Your portfolio is being managed as an all-weather and all-terrain vehicle (“Have You Put Snow Tires on your Portfolio?”) You have tremendous diversification across economic sectors and across national borders. Think of your portfolio as a heavy four-wheel drive truck. It may feel a little slow at times but it will be the vehicle of choice when the storms blow less diversified portfolios off the road.
A superstorm hit in March of 2000 and the NASDAQ Composite Index lost more than 78% of its value in 18 months.* The index did not return to the high of 2000 for a full fifteen years. That is the type of loss that happens when investors chase markets; it is the type of loss that we work hard to protect you from.
We love to make money, but heeding Buffett’s Rule #1, you won’t find us chasing returns in companies whose valuations don’t make sense to us. Ever on the stormwatch, our Board of Scholars contributor Dr. Peter Crabb has a great piece on the growth in government debt around the world (“The Global Credit Bubble”).
Meanwhile, we find the courage to follow our discipline of holding on to a globally diversified portfolio that is biased to what we believe are the best companies at the best price. Our objective is to protect and prepare so that clients can enjoy a financially secure future.
Please also help us welcome Andy Clements as a Client Associate. Andy graduated from the University of Idaho in May. Andy earned a degree in business economics and was the Vice President of Services for Vandal Solutions, a student-run marketing organization.
Robert W. Rathbone