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Investors pay a premium for the illusion of predictability."
- Jason Zweig
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 | STAT Newsletter 2010\06a
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The Best Investment Philosophy
The past couple years have simultaneously re-enforced core financial principles and exposed emotional weaknesses in many investors. With high levels of uncertainty and volatility, some investors have made the decision to either get out or stay out of the market. In general, these investors want more certitude or safety. Implicit within that is a desire to maintain or protect what they have.
What is important to understand is that in order to preserve purchasing power over years and decades we must (with few exceptions) position most of our investment assets in equities and keep them there all the time. Almost $3 trillion is sitting outside the markets in money funds today. After taxes and inflation this is essentially a guaranteed loser yet some investors fail to comprehend this truth.
While we sometimes want to avoid this reality, over long term periods, investment returns come from taking risk. Volatility is a normal, in fact desirable, characteristic of markets. Without volatility we could not lay claim to the premium long term returns. Yes, market corrections and indeed more substantial declines occur regularly and are part of what is expected.
To make a decision to get out of the market really requires two "right decisions. First, when to exit and equally as important when to return. Our experience tells us most investors (this goes for institutional investors also) cannot do this consistently. Our evidence based investing philosophy allows us to forgo this in favor of sensible allocations all the time in all type market conditions. To invest is to protect. Not investing is just the opposite.
- James E. Wilson, CFP� My Blog
 In Barriers to Financial Security, we discuss the very real cost of investor behavior. Previous chapters introduced the series and the importance of investor behavior. The second and third chapters provide a historical perspective for investors. Chapter four is available here. |
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Uncommon Confidence
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As the oldest South Carolina fee-only financial planning firm, J.E. Wilson Advisors provides our clients with objective and independent financial solutions. The firm has developed a number of innovative financial planning tools designed to ensure that client values and objectives are well served.
 WealthRx� is J.E. Wilson's unique wealth management process, designed with successful physicians in mind. Learn more. Contact kstokes@jewilson.com.
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www.jewilson.com
J.E. Wilson Advisors, LLC
2431 Devine Street
Columbia, SC 29205
803-799-9203
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