It has been far too long...

It has been far too long since we reached out and reminded you we are here working hard for you every day.  Reading, researching, and studying to keep abreast of the best in investment management, asset allocation, financial planning, the markets and the global economies.

We are often asked if we use artificial intelligence - absolutely.  But it is important to know that where AI helps us the most is the ability to gather information.  Previously (i.e., pre-AI), to research a particular security, we would go to the EDGAR website (the Securities and Exchange Commission database for corporate filings) to pull the pertinent financial reports of the target company.  Following this, we would move over to one of the financial media websites and download the most recent corporate performance commentary from the management, followed by additional websites to gather the observations and insights from the various analysts who follow that company and industry.  This can be very time consuming…and very important.  But now using AI, we can ask it to fetch a lot of this information for us, and aggregate it into one location for us to consume in one long read.  But it is still one long read…

So while we use AI to help source information, we still build our strategic asset allocations and make our tactical tilts based on our own experience — combined with the research, judgment, and experience of peers, academics, and global institutions, representing hundreds of years of collective expertise.

This may be a little too much of how the sausage is made, so if we are boring you, skip this paragraph.  As an example, it can be fascinating to drill into something as mundane as the various funds that are representative of the asset class large cap core equities, a common benchmark being the widely cited S&P 500.   If you simply go to a service and look at the list of funds that represent large cap core, dozens of names will be presented.  Offerings come from Vanguard, BlackRock, Fidelity and Schwab to name just a few.  However, if you go to the next level and dig deep into how the particular sponsor builds that fund…e.g., how are the constituent holdings capped from over representation, or filtered by constraints such as a minimum number of quarters of positive earnings, a profitability screen, liquidity turnover tests, or a committee overseeing sector rebalancing, etc., you will find that in fact, these funds vary widely in how they are constructed.  We then run them through their historic returns, volatility, drawdowns and various risk and return ratios vis-à-vis their peers, to understand under what market regimes did they excel, or underperform, and how do we think  about these findings in the current environment and the forward-looking markets, economic and political environment.  So, all of this information garnered with AI’s assistance helps us have a broader and deeper view, but judgment tells us how to apply it.

To close out this edition, we are reminded that being an investor is not easy in this era of digital media information.  When I started in this business four decades ago, you had to wait for the nightly newscast to find out how the stock market and economy fared that day.  Now investors are bombarded, solicited or not, with constant updates on the markets and economy.  If you are so inclined, you can go into the internet and find dozens and dozens of websites predicting everything from the end of the bull market, to the end world.  It is easy to get wrapped up in all of this doom and gloom and lose sight of staying the course with your investment plan.  Is there a lot to worry about?  Sure, there always is.  But this has been a fantastic bull market, with many new highs in both domestic and foreign markets, while earnings remain strong, so let us enjoy it for as long as it lasts. We know full well someday there will be a drop, perhaps a significant drop, but an overwhelming amount of research has shown staying the course, and not attempting to time the market, is the superior strategy.  We will share some of the statistics that reinforce this strategy in an upcoming newsletter. 

We are, sincerely yours,

Dave & Drew