Wide Range of Outcomes

“Navigating in a Complex and Potentially Dangerous World” is the header on one section of CEO Jamie Dimon’s letter to his shareholders of JP Morgan.

Jamie and I worked for the same company back in the 90’s and early 2000’s. Some of my close friends worked directly with Jamie and I was told many times by them how smart Jamie is and how much respect they had for his business acumen.

One of the lessons I have learned is to listen to smart people. They may not always be right, but you can always learn something from them.

In his newsletter, Jamie says that he does not plan his business on a base forecast, but instead looks at a wide range of potential outcomes for which to be prepared.

Similarly, that is exactly how we manage our clients’ strategies here. We don’t base your retirement/cash flow strategy on a certain average return. We want to make sure you are ok even if you happen to have an unfriendly period in the financial markets.

Potential scenarios that we need to have our clients prepared for range from inflationary and deflationary scenarios, periods of strong economic growth as well as the inevitable recessions. Geopolitical events crowd the headlines but are impossible to forecast and often impact the economy and financial markets in unexpected ways.

This is why we invest your assets as we do. The great investor and author Peter Bernstein said that “diversification is an explicit recognition of ignorance”. Just like Mr. Bernstein, we don’t know what the future holds so we better have something for all the various scenarios.

Stocks normally provide, over the long term, increasing dividends from increasing profits that generally push the value of the shares up. This has made stocks a reasonable hedge against inflation, at least in the long term. Bonds, now with rates up, provide an attractive source of income and have historically served as ballast against periods of down stock markets. Gold has been money for thousands of years and can’t be created overnight which central banks can do with paper money. Real estate is owned by the companies in your portfolios and has also served as a hedge against inflation.

Another of Mr. Bernstein’s quotes is “The only time you’re really diversified is when you have assets that you don’t want to own”. There will be periods when parts of your portfolio are doing well and others not so well, and the natural reaction is “lets move those underperforming assets into what is doing well!” Chasing what has gone up the most is a great strategy for buying overvalued assets and poor performance.

In our world, slow and steady wins the race- the tortoises last much longer than the hares. Our goal is for you to enjoy your life with the least possible worry about your financial assets. And that is our responsibility to you.

As always, thank you for your trust and confidence in us.

Beach

Disclosure:
Any opinions are those of Beach Foster and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Investing involves risk and you may incur a profit or loss. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. Real estate investments can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws and interest rates all present potential risks to real estate investments. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. If you no longer wish to receive this letter, please reply “unsubscribe”.