A Word From Bob, March 2016

With February behind us, the phrase the “Ides of March” is synonymous with the foreshadowing of a potentially ominous event in the near future. Fortunately for investors, the month of March has a strong historical track record for stock market investors.

The annualized return for the S&P 500 Index for the month of March going back to 1950 through 2015 is +1.06%. March has produced a positive return for 42 of the 65 years in the sample size from March of 1950 through March of 2015. Speaking of stock market returns, the table below provides February monthly returns as well as the 2016 returns year-to-date:
Past results are not indicative of future performance. Data based on prices through the close of business on 02/29/2016.

March Commentary Graphic

While we are always focused on our clients’ long-term total returns, we openly admit that managing our clients’ psychologies is part of our profession. There is clearly an emotional side to the investing process, and we do our very best to keep our clients informed and educated about their investments. This can become an arduous task in a world where we are heavily regulated by the government and where information disseminated by our firm is obsolete by the time our clients receive it.

Studies done by Dalbar, a research company that studies retail investor behavior, indicates that retail investors routinely underperform over the long-term relative to the risk they take in their portfolios. Dalbar’s research concludes that retail investors regularly sell when prices are moving lower and buy as prices move higher. As a result, retail investors regularly miss out on potential portfolio growth due to their emotional responses to ever-changing market conditions.

While we are constantly preaching about the simultaneous diversification of assets classes and investment management style, we recognize the emotional component our clients experience. Discussing risk tolerance with our clients is a critical aspect of our responsibility as your financial advisor. Discussing portfolio risk with our clients is crucial in order to maintain strong relationships built upon a foundation of trust and mutual respect.

We want all of our clients to see appreciation in their portfolios all of the time, but we understand that is impossible. The conversations we have with our clients about their portfolio’s overall risk and their emotional investment IQ helps us dull the edge of the emotional knife. After all, we never know when the Ides of March could strike, but having tough conversations with our clients today helps them understand and prepare for future environments where heightened volatility persists.

As always, I want to be sure to mention that our Honduran Street Party Run at the Streets of St. Charles is scheduled for Saturday, March 26th to support our children in Honduras. For more information or to be a sponsor, please contact our office for more details. In closing, I would remind you to stay healthy, wealthy, and wise, and certainly . . . stay tuned.

Bob

Sources:
http://www.moneychimp.com/features/monthly_returns.htm
https://finance.yahoo.com/q/hp?s=^GSPC&a=11&b=31&c=2015&d=01&e=29&f=2016&g=d
https://finance.yahoo.com/q/hp?a=11&b=31&c=2015&d=01&e=29&f=2016&g=d&s=^DJI%2C+&ql=1
https://finance.yahoo.com/q/hp?a=11&b=31&c=2015&d=01&e=29&f=2016&g=d&s=^RUT%2C+&ql=1
http://aimprogramblog.blogspot.com/2014/09/the-under-performance-of-common.html