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3 common problems preventing an investor’s expectations from being satisfied include:

i. Poor investment risk management
ii. Too many eggs in one basket – one stock, one asset or investment style
iii. No one is making the “tough calls” to benefit portfolio performance

We have found long term expectations are met by investment planning based on momentum and fair valuation models.  Depending on which model is used, research supports the idea that investment classes rotate in and out of favor.  So an investor should resist the temptation to fall in love with his/herinvestment holdings.  Show your investments some tough love to boost your long-term expectation for your portfolio’s health.

As an example, we examine several random events (the table’s columns) and preferred asset classes at those points in time (the table’s rows):

1999 Tech bubble wanes 9/11
2002 Recession Ends 2004
Pre-Lehman collapse Early
Real Estate Third World
Third World
Natural Resources Gold Natural Resources Gold Cash Natural Resources Gold
Long Treasuries Treasury Strips Natural Resources Gold Third World
Cash Natural Resources Gold Cash
Third World markets Real Estate Small Cap stocks Oil Third World markets Global Blue Chips Global Blue Chips

This analysis is not foolproof.  Errors are a certainty.  Yet, by seeking to minimize errors, we find outperformance may occur.
Develop a disciplined investment process with your advisor:

1. Analyze preferred assets then meld that into your risk profile.

2. Next, regularly review the relative performance for your portfolio.  The following chart is an example format we use to illustrate a client’s portfolio performance (blue line in the sample displayed below) versus their market benchmark (green line).

3. Naturally, the blue line may not always outperform the green line.  You should expect fluctuations in the near term.  However the long term return should fall in line with your expectations.

4. To learn more about how our research may help your expectations for your portfolio, visit our blog.  Better yet, contact us and we will evaluate how to make your portfolio meet your expectations.