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South Burlington, VT

Value Creation Blog

My Personal Take On Investment Management

Posted by Josh Patrick

Investment Management

A major part of my day involves working with our clients on investment management issues.  Over the past several years I and I believe our firm have come to believe in certain principles.  Unfortunately, the rest of the investment industry seems to have different ideas about how investment management is provided for their clients.

I believe in starting with the macro environment.   I believe in starting with what’s going on in the macro environment and what that means for our clients.  Right now I think we’re in a secular bear market.  I believe this market started around 1999 and we’re likely to be about half way through the tough times we’ve been experiencing.

Because of this, there is a stronger than normal possibility that investment returns will be flat to down during this period.  We also are likely to experience some serious drops in the market followed by climbs out that don’t quite reach where we were before the drops started.

I believe using investment mangers who mange for this type of market.  Since I believe that there is a strong chance of having large downdrafts in the market I want to have investment manger partners who can move to any part of the market they feel is necessary.  I’m more interested in protecting against large downdrafts and getting a reasonable return when the market rebounds.

Ed Easterling of Crestmont Research has done some excellent research that shows that in a secular bear market you only need to get 30% of the upmarket to beat a buy and hold strategy that many people use.  I think this research makes sense and suggest to our clients that we should this as our investing goal.

I believe that asset allocation is more important than security selection.  It seems that many advisors and investment managers talk about how their stock selection is superior to other advisors.  In my opinion this isn’t something I’m especially interested in.

Research has shown that asset allocation is much more important than equity selection in the long-term.  I think that investment strategists that spend that majority of their time on deciding what asset allocation to use versus which company to invest or which bond to buy makes more sense.  Those are the managers I’m most interested in working with.

This is my take on what’s important for investment management.  It doesn’t reflect the views of other members at Stage 2 Planning or the views of NFP securities.  I would love to hear your thoughts.  Please contact me at Jpatrick@stage2planning.com.  Or, please click on this link and we can set a time to talk.

Josh Patrick

We have a video we would invite you to watch on the investment environment.  It’s called Rowing and Sailing and we think you’ll get some real value in this short program.  Click on the button below which will take you to the video sign up page.

Rowing and Sailing

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: financial planning, financial independence planning, investment management

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