Past Experiences

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“History doesn’t repeat itself, but it often rhymes” — Mark Twain 

One of the most challenging aspects of investing in stock markets is dealing with the volatility and variability of returns of different asset classes. This has been especially challenging over the past two years, with large growth stocks far outpacing their historical averages and value stocks lagging theirs. This has led many investors to ask, “What’s going on, and is there anything I should be doing about it?” 

Short of there being a pretty clear existential threat to our democracy and market economy, the answer to the question “What’s going on?” will vary greatly among individuals, corporations, and politicians, and their responses will be just as varied (and probably misguided). 

Asking the question as a long-term investor should be more an intellectual exercise than an actionable one. We should ponder the unique aspects of the current political, economic, social, and market environments as a way to broaden our perspectives, but our actions should be limited to following the structure and discipline of our personal investment plans. 

These plans were built on very rational expectations supported by outstanding financial science. Altering portfolio allocations or portfolio investments based on short-term circumstances (particularly performance) can significantly alter these expectations. 

At times like these, those alterations are likely to result in lower expected returns compounded over a very long period of time. 

As I’ve pointed out in previous Asset Class articles, it’s not practical to assume you can make up for this lower expected return in later years unless you’re willing to take on a much higher degree of risk than what you’ve told us you’re comfortable with. 

In our 27-year history of offering modern investment advice to clients, we’ve experienced two market and economic environments that are similar to today’s. Our perspectives during these times were represented in a series of Asset Class articles. We encourage you to go back and read these again (or for the first time) and consider how history rhymes. 

Very large and expensive U.S. growth stocks have dominated the current market. As these past articles suggest, we look forward to the higher expected returns available with large and small value stocks (U.S. and foreign). Through disciplined rebalancing, we take advantage of these return disparities while maintaining our well-developed long-term investment plans. 

Equius Partners, Inc. is a Registered Investment Advisor.

Past performance is not a guarantee of future results. The data and information set forth herein are provided for educational purposes only and should not be considered tax, legal or investment advice; a solicitation to buy or sell securities; or an opinion on specific situations – as individual circumstances vary. There is no guarantee an investing strategy will be successful. Investing involves risks, including possible loss of principal. Diversification does not eliminate risk, including the risk of market or systemic loss.

Please consider the investment objectives, risks, and charges and expenses of any mutual fund and read the prospectus carefully before investing. Indexes are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

© 2023 Equius Partners, Inc.

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