Content provided by Grant Engelbart, CFA, CAIA, Director of Research & Senior Portfolio Manager

I normally would never single out individual investor performance, but in this case I believe it’s necessary.

Earlier this year, on the same day, two accounts in the same household were invested in two different CLS strategies with a 100 Risk Budget Score. We received the proper paperwork and cash to invest on January 26, 2018. While not intentional, January 26 marked the peak for global stocks in 2018 (so far), after an incredible run from January 2017.

I normally would never single out individual investor performance, but in this case I believe it’s necessary.

Earlier this year, on the same day, two accounts in the same household were invested in two different CLS strategies with a 100 Risk Budget Score. We received the proper paperwork and cash to invest on January 26, 2018. While not intentional, January 26 marked the peak for global stocks in 2018 (so far), after an incredible run from January 2017.

Time

This investor is a bit younger, so they have a long investing horizon. A lot of our investors don’t have the same amount of time, but I believe most investors have more than they think. At retirement, life expectancy is typically at least 20 more years — a significant amount of time to continue growing your money even while taking distributions. Using the MSCI World Index back to 1970, returns, even over short periods such as three to five years, are positive, and typically very positive, an overwhelming majority of the time. (If you need your money in less than three years, the stock market may not be the best place.)

Value

I recently wrote about Warren Buffett’s 88th birthday and how value investing requires a bit of a strong stomach at times — especially when growth stocks are soaring. However, the results over time are compelling; otherwise, no one would invest that way. There is plenty of academic support and long-term results from many value-oriented funds and managers that support value, but a simple simulation can also shed some light.

For this example, I took seven major asset classes with adequate history back to the late 1980s and looked at the returns of owning the worst performing asset class the three years prior, updated every January. This isn’t how we invest, of course, but interesting nonetheless. What do returns look like for this portfolio? Over the last three years, returns have been pretty abysmal (the strategy has owned commodities). However, since 1990, returns have been outstanding, more than doubling the ACWI. Again, not how we manage money but consistent with our contrarian, value-oriented mindset.

Contributions

This doesn’t apply to everyone, but this particular investor is contributing monthly to his or her portfolio, as many investors are in qualified accounts. This may provide the investor with some solace in knowing that not all assets were invested at the same time and that he or she is continuing to invest either at lower points over time or riding the upward momentum (however you want to spin it!).

These are just three of the big reasons that this investor has fewer reasons to be concerned about their investment. Which is great, because these two accounts happen to be my own! Yes, this novice investor with terrible timing is none other than yours truly. And they say portfolio managers are overconfident…

2035-CLS-10/24/2018