It would be easy to ask: what is not a problem right now? Strife around the globe continues with conflicts and protests erupting in many places this past quarter, most notably in Libya, Egypt, Tunisia and Yemen. The entire world watches and worries, about oil, about freedom and about the future. The European Union continues to work with their members whose finances are still dangerously over extended. In the United States, we have the specter of possible government shutdowns, gridlocked legislative forums, still falling housing markets, excessive debt (especially in the public sector), and sputtering growth.
Yet, despite these overhangs, our domestic stock markets have performed extraordinarily well. Overall the Dow Jones Industrial Average and US large cap based Standard and Poor’s 500 index have been very profitable. While they look good for the last three months and one year, their three, five and ten year numbers are still between 1 and 4% a year. Since we look at our client’s risk tolerance, allocating among different types of investments, and the long term, we are not focusing on just one economic indicator.
Indeed, our asset allocation methodology has consistently placed funds in forward looking places, which at the time of the initial investment, may seem unrelated to current events. Our emphasis on international and emerging markets investing has helped our clients obtain better results with their overall portfolio for 3, 5, 10 and longer periods of time. My travels to developing Asia and emerging Europe starting in the early 1990’s set the stage for those allocations. We are now finding value and opportunity in what are being called Frontier Markets.
We do not expect to always “beat” a pure stock index… no one usually has an all stock portfolio. It is true that when the markets are moving ahead, often an all stock index will do better. When we have retreats (or if you felt at the time like it was a rout in 2008), stock indexes are pushed much lower. So measuring every heart beat of performance activity does not make any sense. The future is more than just framing the present and projecting it forward.
At Personal Financial Consultants, we continue to look to the future as a company as well. I am pleased to announce that Nicole Hanson, CFP® has been promoted to Sr. Managing Advisor of our Emeryville office. To learn more about Nicole’s qualifications, you can visit our website at www.personalfinancial.com/team/nicolehanson.html.
We just released our Spring 2011 Quarterly Newsletter—you can go to our website to check it out.
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