The first quarter of 2017 is over, and it was a good one. 

The “Trump Rally” continued almost unabated, and new records for the unmanaged stock market indices were made most weeks.

It’s nice to have a “tail wind” behind you in your investments, but one quarter does not an investment philosophy make.

In my video to the right, I talk about the 3 most important things I’ve found to be helpful in reaching your financial goals.

And they’re not complicated.


Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive full service financial services firm headquartered right here in Boulder Colorado.  Today I want to talk about their first corner quarter and I want to talk about the rest of the year, but of course I’m always going to throw in some general advice.  It sounds like I’m a broken record at times because I do bring up certain things over and over again, but I think that they’re the foundation of as I view the world how clients should be successful.  The first-quarter very strong for almost all of these unmanaged stock market indexes; a continuation of an upward trend every sense the election.  So November/December really just kind of carried forward into January, February and into March.  I’m doing this video a couple of days before the end of the quarter so I don’t have the numbers right here to spit out at you but I will include them in the written news letter.

I was with a lawyer friend of mine, we serve on a board together, and we were looking at some solution to a problem.  And I’m like, “Gosh, we really need to have an out of the box solution and here’s an idea.”  And he’s like, “Mike that sounds like an out-of-the-box idea but it really isn’t.  I’ve been a lawyer for 30/40 years and that’s what everybody always comes up with.”  I’m like okay great I kind of felt stupid.  But the reason why I brought that up is from his point of view he hears it time and time again, but to the person who’s bringing it up it sounds new and unique.  And I’ve now been meeting with the clients, been in the investing world the financial services world for coming up on 26 years and I have seen ups and downs and sideways.  I’ve seen kind of everything that can happen over 26 years.  And when the unmanaged stock market index the Dow was at 10,000 people would come in and say well it’s quite obvious that the market is at a top.  And I’d be really?  Why is it obvious?  And then, of course, when it’s at 12,000 and 15,000 and then it’s taking a little while to go from 18 to 20 in the last year or so but it’s like well it’s obvious it’s at a top.  And even now as we end this quarter every once in a while I’ll hear someone say it’s so due for a correction and it’s obvious that it’s at a top.  And my answer is there’s always corrections.  I mean you’ve seen that chart probably, and I’ll throw it up on the screen again at some point during this video, but it’s normal for there to be declines in the market of some type.  I mean that’s the normal that’s not the abnormal thing and so that’s just part of investing.  And so while it might seem obvious that we’re at a top or that something is happening from your point of view, nothing is obvious.  The future is always being written.

And we as investors are always making probabilistic predictions, hey I believe that having a diversified portfolio is probably going to be good for me and this is the probabilities of it.  Or I ought to have all equities let’s say, one person might say, or I need to have all bonds.  I mean these are just probabilities that we’re placing about the future, but the probabilities are never 100 percent.  So when someone comes to me and says well it’s quite obvious, nothing is obvious.

I was meeting with a wonderful couple.  I’ve known them actually one of the two for a long time, I mean it’s actually wonderful that both of them are just about to graduate med school, a great meeting.  And we talked about investing and I said, “Well gosh, in your world there’s probably simple things and complex things.  In order to have a good life you probably have to eat well, exercise and don’t smoke.”  And they kind of laughed and were like, “Yeah, that’s probably about the best three pieces of advice.”  And I said, “Well in my world it’s very similar it’s know what your income and expenses are on a monthly basis and make sure that your expenses, of course, are not greater than your income.  Number two is avoid stupid stuff, that Chihuahua farm sounds great or some investment sounds great kind of avoid stupid stuff, and then three is know that there’s going to be things that are going to happen that might derail you from that plan.  And that might be the loss of your spouse, the loss of the ability to work, things that perhaps can be fixed by buying some insurance.  And so it’s understanding those things that we can control and those things that we can’t control and being comfortable with the things that maybe we can’t solve but also having a backup plan, whatever that might be.  Or that backup plan might be I’m just going to have to deal with it.  I’m just going to have to minimize the impact it can have in my whole plan but I’m probably going to have to suck it up and maybe just kind of move through it.”  And so that’s it.  Let’s not overcomplicate reaching our financial goals by spending so much focus on those things that we might not be able to control.

I’m going to put up on the screen that first chart that I talked about, which is the red numbers at the bottom are the – it’s normal for there to be declines, intra year declines.  And you can see that it’s normal for there to be double digit intra year declines.  However, you can see that the vast majority of years are positive and when we add them all up, at least historically, that has been in the favor of the investor and the long-term investor.  If you need your money short-term you probably shouldn’t have your money in there anyway because by the time the business cycle, you know, it’s still in the middle of the business cycle you might need your money and so you don’t want to do that.  So understand your risk tolerance, understand what your time horizon is and then, of course, a portfolio that fits for you individualized for you.

The second chart that I’m now throwing up on the screen is the benefits of being diversified and also having a long-term horizon.  The three columns on the left-hand side are one year so this is going all the way back to 1950.  And you can see that in one year there could be a huge variance huge ups and huge downs; you can see that bonds is that middle bar there, ups and downs again; and then a mixture of the two 50/50 in this case of two unmanaged indexes of stocks and bonds.  But you can see that when you look out five, ten and 20 years a mixture of them there’s actually never been a five year, ten year or 20 year where you haven’t at least broken even or made a little bit of money in a diversified portfolio.  So the future could absolutely be different.  However, we’re dealing with probabilities here.  We’re trying to do the best that we can as investors and keep our eye on the long-term advantage to you, which is reaching your financial goals possibly passing it onto the next generation income for you, et cetera.

And so I think that that is one of the key ingredients in reaching it, not whether or not the market is at a high or you’re going to wait for it to go down five or ten percent and then buy in.  I mean if you’re in this for the long-term you need to make the decision and move forward because the number of times I’ve seen people lose more money trying to avoid the declines is more than they would have lost in the actual decline because they’re sitting here waiting out and the opportunity cost to them about what they would have had, the perfect time to be in is more than what they would’ve had to maybe purchase in at the imperfect time, but then understand that they’re in this for the long-term that it might go down before it goes up.

I continue to be optimistic about 2017.  I think that all the ingredients are there when you’re looking at momentum in the market, a very pro business environment, consumer sentiment, lots of money, lots of cash there on the sidelines.  I think that if there is a potential tax change, corporate tax change, a repatriation of capital backing into the United States these are all very positive moves that would help us out as investors and people who are trying to invest for the long-term and have a good portfolio.  So I’m still continuing to be optimistic understanding that we’ve got to find the portfolio that works for what we want to do, individualize, et cetera.  So if you’re my client, of course, I’ve talked with you and we can talk about that some more.  If you’re not my client you should be; shame on you.  Give me a call or meet with your advisor and find out what might make sense for you.  But great first quarter; I think it’s going to continue.  The probabilities as I read them things are good, but let’s keep our basic common sense, which is what’s your time horizon, what’s your plan, what’s the mix that’s going to allow you to stick with your plan and of course be diversified and keep your emotions in check and be rational about this thing.  Understand those things we can control and those things we can’t.

Anyway, that’s enough for me today.  I think I’m rambling on.  I’m going to try to be a little bit better on getting these videos out more regularly.  Always feel free to give me a call and I’m here at your service.  Mike Brady Generosity Wealth Management 303-747-6455.  You have an awesome day, awesome weekend.  Thanks.  Bye bye.  See you.  Bye bye.