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The simplest and truest reason as to why we diversify is that we don’t know what assets will do very well in the future, and which assets will do poorly. Diversification is the evidence that we cannot accurately and consistently forecast the future. When we invest during a period where one asset vastly outperforms all others, it can be very frustrating to remain diversified. We may be tempted to sell the underperformers and invest more heavily in that which is outperforming. Despite these inclinations, there is strong evidence to suggest that diversification is the best strategy.

The basic premise behind successful investing is to buy an asset at a low price and sell it at a higher price. Simple and straightforward. But doing that often requires discernment, patience, and discipline – which can require near superhuman strength to do. It is not easy!   

Most investors love economic and market forecasts. With the markets so uncertain and volatile, our brain craves some sort of idea of what the future holds. But economies and markets are unpredictable – evidenced by the fact that no one can consistently predict them with accuracy.

Dive into the world of market forecasts and their accuracy. Discover why financial predictions often miss the mark and why sticking to your investment plan beats relying on unreliable forecasts.

Discover how to protect yourself from rising cyber scams. Learn about common fraud tactics like phishing and tech support scams, and get actionable tips to safeguard your assets and personal information.

As we manage your investments and guide you through this election year, it's important to remember the value of staying committed to long-term investment strategies despite the inevitable noise generated by political headlines. Attached is a short SEI Presentation that I found very interesting and thought worth sharing about market cycles through past election years. There are a few themes to remember:

Last month stock markets experienced a mini crash, accompanied by dire headlines and prominent Wall Street experts calling for emergency Fed rate cuts. After a long period of serenity in the markets, we experienced a few strong down days. In addition, the VIX, which is a measure of volatility, spiked above 60.1 The last time the VIX spiked so much was during the Global Financial Crisis and COVID. Was this that bad? Of course not. There were “reasons” for the move, but none of them were good or lasting. The main reason for the drawdown and spike in volatility was that investors overreacted. Within a few days of this mini crash, the markets experienced a strong recovery. It took less than two weeks for the markets to recover. It was as if the mini crash never happened.

At the beginning of the summer, we experienced a global Microsoft Windows outage, which took many businesses offline. This is a great reminder of how sensitive computing and cloud technology can be. You would think that something that prevented people from corresponding via email and incapacitated Delta Airlines for days would be a malicious virus. But that was not the case. This was simply a CrowdStrike software update containing an incorrect code. Something so simple did so much damage!

Nick Saban, recently retired football coach of the Alabama Crimson Tide said, “If you want to be good you don’t really have a lot of choices.” He was referring to the choice to either be disciplined or not to a specific process that would lead to success. No one is born an athlete. We are all human with similar preferences: sleep/rest over working out, eating the donut rather than broccoli, and having fun instead of working.

As we prepare for basketball’s march madness tournament, it is a good time to reflect on how maddening the stock market can be. What causes the madness of the markets? Many things, but one of the greatest frustrations to investors is the significant fluctuations in asset prices. These fluctuations, also known as volatility, are driven primarily by dire and urgent headlines, spurious market and economic forecasts, and our own emotions. But such volatility is normal!