Patience

Tyler Linsten Investing, Personal Finance

Possibly one in a million.

Possibly one in a million.

What does a picture of a sunset have to do with investing? Quite a lot, in my book, actually. I’ll quickly elaborate.

I live in a very scenic area of Seattle near Alki Beach so I find myself lucky enough to be in place to view a lot of beautiful sunsets. My phone’s full of sunset pictures. Most of them are just average, a few are pretty forgetful but then there is the picture above. It’s an absolute masterpiece. I may never again capture something so amazing. Yet, most importantly, I’ll keep trying.

This process is a lot like investing. It has parallels to a tenet I hope my clients are sick of me talking about: staying focused on the long-term. Keeping your portfolio allocated appropriately while remaining patient is going to eventually produce positive returns. It’s important to keep a process, regardless of short-term market results. If the process is sound it will produce returns over time. But only if you keep it up. Warren Buffett agrees.

With the same mindset, I’m going to keep my camera pointed toward the Olympic Mountains at sunset, hoping to one-up the above picture.

The market rewards patience. So does the Western sky.

 

War in the Middle East, Crashing Jetliners, Ebola…Oh My!

Tyler Linsten Investing, Personal Finance

 

Last week the world had its fair share of headline-grabbing events. Stocks, measured by the S&P 500 index, were down over 2.5%. Time to lighten up on your equity holdings?

Please don’t.

It’s a sad truth, but very bad things are going to continue to happen in the world. Every day, pundits will tell us there is a new threat to the global economy. They will tell us how this time it’s different in the Middle East, this time that dictator is a major threat to our livelihood and this time that virus is surely going to wipe out the population. Fear drives viewership and mouse clicks.

Sorry, pundits, but the truth is that this time is almost 100% certainly just like last time: a footnote in history. As investors and allocators of savings, we must tune out the short term noise and always focus on the bigger picture. Does a renewed conflict in Gaza materially affect the earnings outlook for US stocks? Does (unfortunately) another terrorist attack suddenly crater the value investors are willing to pay for those earnings? Probably not.

The human suffering and tragic story lines of all geopolitical events tend to resonate with certain investors who will overreact to the images they see. In turn, financial assets will fluctuate with this emotion. It is our job as investors and savers to look beyond this day-to-day drama.

Let’s look at stocks specifically. If someone wants to know why certain stocks went down on a given day, usually the true answer is, “well, some people wanted to buy and some people wanted to sell, it just turns out the price they settled on was lower today than the day before.” We rarely get that answer because it’s much sexier to attach a headline to it. The market is open five days a week. Stocks have to go somewhere and so sometimes they go up and sometimes they go down. Only when we start to attach themes will emotional overreactions begin to prevail.

At some point, a minor headline will turn into a major one and it will affect financial assets in a meaningful way. Investors must be ready to interpret that change and act accordingly. Until then, let’s stick to the plan.

 

The 1%

Tyler Linsten Investing

wolf_wall_street3

 

No, I’m not talking about the 99% versus the 1%. I’m talking about the most powerful force on earth: compound interest.

If an investor can earn an extra 1% on their investment portfolio, the effect of compound interest churned over decades reveals a massive windfall. It can be the difference between a comfortable retirement and a nervous retirement.

My goal as an advisor is to make sure every client gets that extra one percent. That said, my strategy to get there has nothing to do with making riskier investments or “beating the market.” It has everything to do with fees: my fees and the expense ratios of your investments.

“In investing, you get what you don’t pay for.” – Jack Bogle, Founder, the Vanguard Group

Let’s say you’ve got your money with Your Guy and he charges you 1%, while the mutual funds his company forces him to sell to you charge you an extra 1% in yearly expense ratios. Enter Alder Cove Capital. My fees, at 0.5% for over $100k in assets, are roughly half of what the average advisor charges for portfolio management and I am not bound by any agreement to sell you expensive investments. Quite the opposite – I can build your entire portfolio using low fees as a major factor going into the selection process. It’s very possible to build a suitable, diversified portfolio with a net, total portfolio expense ratio under 0.2%. No more huge up front commissions on mutual funds, no more Contingent Deferred Sales Charges and no more misaligned interests.

There’s your 1%.

It’s kind of a big deal:

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