Recently, Legacy was voted by AdvisoryHQ as one of the Top 10 Best Financial Advisors in Oklahoma City and Tulsa. We have experienced tremendous growth within our firm over the past few years and we are happy to see the positive reflection that has for our clients and our community. At Legacy we strive to offer the best client experience possible.
Despite all the negative news constantly streaming on our TV screens, the equity and fixed income markets continue to perform very well thus far in 2016. In fact, this year we have seen many equity asset classes bounce back from a lackluster 2015. US value stocks, US small stocks, emerging markets and the energy sector are handily outperforming the S&P 500 in 2016. Yet another lesson in why investing requires discipline and a long term, evidence based strategy and not predictions or forecasts involving short term market movements.
Now that we are only a month away from the elections, many people are wondering how this event might affect their investments. Investors often get caught thinking that if their candidate wins the market will do much better and if the other candidate wins the market will immediately fall sharply. The problem is that both sides of the political isle think the same thing!
So who is right? Maybe surprising to some, the answer is neither. While the US Presidential election is certainly a major world event, it is but one of thousands of variables that can affect the stock market. The chart below shows the average annual returns for every president since 1929.
Presidents vs. Markets and Inflation
Recently a well know financial advisor wrote a very good article concerning the difference between investing process and investing outcome. It is easy to read and he provides some great examples so I encourage you to read it:
Here at Legacy Financial Group we have always been proponents of academic based investing. Our goal is to design portfolios based on what we know from academic research and empirical data about how markets work and where returns comes from. As a result of this philosophy we have used mutual funds from Dimensional Fund Advisors (DFA) as the core of most of our portfolios. They have a long history and strong foundation in building investment vehicles that maximize the use of our knowledge of financial markets. Below is a video highlighting the academic pedigree of DFA and some of the key academic finding that are incorporated into all their funds.
The best performing developed market of the past 20 years will come as a surprise to most. The fact that an investment in this country nearly doubled the return of the US during this time will be even more surprising. But the most interesting aspect about this country's performance is how it became the best performing developed country over the last two decades.
I have a client who is a big OU Sooner fan. I mentioned to him my hope that OU would stand a chance against the heavily favored Alabama Crimson Tide to which he responded in jest, "I hope you aren't putting MY money on an upset." After the game I could not help but see the parallel to this year's outcome and how people actually think about investing for retirement.
"I went to cash because..." Fill in the blank. This is a common phrase uttered by market pundits, advisors, and amateur investors everywhere. And there always is a seemingly very smart reason to justify putting your investments in cash instead of the market. However; what appears on the surface to be a good investing idea often stands in sharp contrast to the actual results.