PDS Planning, Inc.’s Post

Friends, This past week emphasized the critical importance of periodically tweaking your investment portfolio to ensure the right mix of stocks and bonds, known as asset allocation. Jeff Sommer highlights the significance of this practice, stating that without rebalancing, you may inadvertently be taking on risks you wish to avoid. #Investing #AssetAllocation #PortfolioManagement

Q1 2024 closed out with the best first quarter performance for global markets in 5 years. In our Seaspray Financial Services Ltd Q1 Investment Review & Outlook we outline how this period was dominated by 4 ‘i’s- Inflation, Interest rates, Income / earnings, and Investment themes and highlight where we see headwinds and growth in 2024 and beyond. 📈 #equities #bonds #commodities #globaleconomy #domesticeconomy #investing #markets https://lnkd.in/eS-ibpeJ

My colleague Kristy Akullian, CFA and I just released our Q2 implementation guide where we dive into strategies for navigating and adapting your portfolios to current market dynamics. While recent GDP growth figures fell short of expectations, the overall economic position remains stronger than most were forecasting at the beginning of the year. We remain overweight equities, with a particular focus on quality stocks with strong balance sheets. We are also seeing opportunity to diversify bond portfolios beyond the traditional in the face of potentially “high for longer” interest rate policy from the Fed. You can check out our full Q2 implementation guide here for more portfolio insights: https://lnkd.in/gYnnxUQ2.

“𝑻𝒉𝒆 𝒎𝒂𝒓𝒌𝒆𝒕𝒔 𝒉𝒂𝒗𝒆 𝒃𝒆𝒆𝒏 𝒓𝒂𝒍𝒍𝒚𝒊𝒏𝒈. 𝑺𝒉𝒐𝒖𝒍𝒅 𝑰 𝒔𝒕𝒊𝒍𝒍 𝒊𝒏𝒗𝒆𝒔𝒕?” I feel we get asked this question every time we have a rally lasting over a few months. And as the markets hit a record high after record high (35 and counting this year for the S&P), we are again hearing this question more and more. The short answer is yes - for long-term investors, time in the market beats timing the market. But to make the point more clearly, I’m reminded of this study which compared fictional characters investing $2,000 into the S&P 500 annually between 2003-2022 ( including 2022, which, btw was a very bad year for the markets, -13% per cent return) 💰 Investor 1 times the market perfectly, investing at the lowest point each year 💰 Investor 2 ignores market conditions and invests as soon as they get their money 💰 Investor 3 consistently dollar cost averages  💰 Investor 4 has the worst timing, investing at the highest point each year 💰 Investor 5 never gets around to investing and keeps their cash in T-bills As you would expect, timing the market perfectly led to the highest returns (If you know a person like this exists, we are hiring!), but the other results might surprise you: 📈 Immediate investing led to marginally lower returns as timing the market perfectly (only about 0.5% less annually) and dollar cost averaging was not far behind. 📈 The investor with the worst timing still ended up with $112,292 - a 180% simple return on the $40,000 they invested and just 20% less than the investor who timed the market perfectly. 📉 The investor who stayed in cash had just $44,000—less than half of the worst-performing investors! The upshot of this? Investing as early as possible, wherever the market is or dollar cost averaging, won't be far behind from consistently calling market bottoms. So the best you can do is maximise your time in the market to benefit from compounding returns.

The Futility of Market Timing: Why Buy-and-Hold Trumps Active Trading In his 2023 Giverny Capital Annual Letter, François Rochon, founder of Giverny Capital, presents a compelling case against the practice of market timing, arguing instead for a buy-and-hold strategy. Key insights: 1. Timing pitfalls: Rochon emphasizes that trying to time the market by predicting the best moments to buy or sell stocks is often counterproductive. 2. Buy-and-hold superiority: Historical data shows that investors who remain consistently invested outperform those who frequently trade in attempts to time the market. 3. Long-term returns: Stocks have historically returned 10% annually over the long run, compared to 5% for bonds and 3% for cash, illustrating the benefits of staying invested rather than timing entries and exits. 4. Compounding effects: The power of compounding favors those who stay invested. Even small differences in annual returns can lead to significant outperformance over time. 5. Emotional traps: Market timing often leads investors to make emotionally-driven decisions, selling low in panic or buying high out of exuberance. 6. Volatility and patience: While short-term market fluctuations may tempt investors to time the market, Rochon argues that patience through volatility is key to long-term success. Rochon's message reinforces Giverny Capital's investment philosophy: resisting the urge to time the market and instead focusing on a disciplined, long-term buy-and-hold approach is the most reliable path to investment success. Reference: Rochon, François. 2023. "Giverny Capital 2023 Annual Letter."

Hold cash in your cash reserve Not in your investment accounts This may seem trivial to you, but it's a common blunder that will reduce your lifetime returns "But what if the market goes down"? What's your time horizon? People say they are "long-term investors" but then ask these kinds of questions The key is education around realistic expectations Yes, past performance is not an indication of future performance, but when it comes to the overall stock market, it's been a decent guide for the long-term investors expectations

Hold cash in your cash reserve Not in your investment accounts This may seem trivial to you, but it's a common blunder that will reduce your lifetime returns "But what if the market goes down"? What's your time horizon? People say they are "long-term investors" but then ask these kinds of questions The key is education around realistic expectations Yes, past performance is not an indication of future performance, but when it comes to the overall stock market, it's been a decent guide for the long-term investors expectations

NEW: Check out this week's market update! #MarketRecap | Stay informed! Our market update provides the latest insights on the economy and what's driving market activity. Reach out if you're interested in booking a meeting to discuss your investment strategy. Click the link below ⬇️

Most stocks outside the Technology sector were flat to down as minutes from the Federal Reserve’s May meeting raised concerns of persistent inflation, indicating… Chief Investment Officer, Chris Bouffard, CFA recaps last week's economic and market performance in our Weekly Market Update.📈 https://ow.ly/AAL350RYsac #marketupdate #marketperformance #investing #wealthmanagement

NEW: Check out this week's market update! #MarketRecap | Stay informed! Our market update provides the latest insights on the economy and what's driving market activity. Reach out if you're interested in booking a meeting to discuss your investment strategy. Click the link below ⬇️