A Word From Bob, November 2015

It is hard for me to believe that Thanksgiving is only a few weeks away! Autumn is already in its full regalia and temperatures are beginning their descent towards the winter chill. With frigid temperatures and the threat of snow and ice, the winter season is not all that appealing. However, the best part about winter is that it will eventually end.

The total return for the S&P 500 Index through the end of September was a net loss of 138.87 points, or a year-to-date return of -6.74%. Our clients received their 3rd Quarter statements in the first week of October and the timing of the statements corresponded with a flurry of activity as our phones rang and the email servers were pounded with our client’s emotional responses related to their portfolio performance.

Part of our job as financial advisors is to assist our clients in managing their emotions and behavior. Behavioral finance is a growing field in academia that studies investors’ emotions such as fear and greed, along with herd instinct, and the impact those human attributes have on investment returns. According to Dalbar’s 21st annual Quantitative Analysis of Investor Behavior study, the single largest contributor to investor performance shortfalls is psychological factors.

We did our best to focus our clients’ attention towards a long-term investment horizon. We had a multitude of conversations with our clients where we discussed the asset class diversification present in their investment portfolios, and in cases where it was pertinent that their portfolios contained non-traded, alternative investments which helped enhance their diversification.

The S&P 500 Index opened at 1,919.65 on October 1st and closed the last trading day in October at 2,079.36. The October rally in the S&P 500 Index was 159.71 points, or a monthly return of 8.32%. Investors that reacted emotionally during the selling pressure in September and sold their stock positions missed the October stock market rally. The October rally was the best monthly performance for the U.S. stock market in more than four years.

I continue to believe that focusing on diversification across multiple asset classes, including alternative investments when it is appropriate, is the best long-term investment strategy. Similar to winter, the best thing about stock market corrections and bear markets is that they eventually end. It is our job as financial advisors to help people remain rational and make decisions that are built around reason. Yet again, investors that reacted emotionally during the recent selling pressure paid the price as they likely missed all, or part of the October stock market rally.

As always, I would remind you to stay healthy, wealthy, and wise, and certainly . . . stay tuned.

Bob

http://finance.yahoo.com/q/hp?s=%5EGSPC&a=11&b=31&c=2014&d=08&e=30&f=2015&g=d&z=66&y=132
http://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/
http://www.advisorperspectives.com/commentaries/20150408-streettalk-live-dalbar-why-investors-suck-and-tips-for-advisors
http://money.cnn.com/2015/10/30/investing/october-stock-market-consumers/

Diversification (Asset Allocation) does not guarantee a profit or protect against loss.