What Keeps Us Up At Night?
The ghosts and goblins of Halloween are in the rear-view mirror so what keeps us up at night now? Are macroeconomic conditions a concern? What about political discord at home and abroad? Maybe the dreaded Black Swan event is our bogeyman? Our true fears are a bit more down to earth than these.
Big picture news stories may dominate the media, but our clients’ portfolios are not dependent on the outcomes of these events. While it’s difficult to predict what will happen, it’s impossible to predict how the markets will react to what will happen. The news cycle is beyond our control.
Our real fear lies in behavioral issues. Is the bull market lulling us into a false sense of security? There is a temptation for investors to poke at portfolios during times of low volatility to feel like they’re doing something. Holding a diversified portfolio can feel disappointing when one asset class is shooting up. Fear of missing out makes us ask why we don’t hold more of that asset class. We conveniently forget it was a drag over the last few years, allowing us to buy low as we rebalanced. Portfolio diversification is never a trending topic, but it’s more important than any prediction we could make.
Identity theft is becoming a greater concern. We are continually evaluating and evolving our security measures. It used to be that someone would need your wallet or to dig through your garbage to track down your private data. Now that we use computers, tablets, and smart phones to communicate or even shop online, vectors of access to your private information are multiplying. We are confident in the security in place at our office and our partners like Schwab, but personally knowing our clients is a security feature no software can duplicate.
Investing behavior and online security are things investors can control. Human nature can make it difficult to follow an investment plan in the face of an irrational market. Updating a password is a pain in the neck, but it addresses a more concrete threat to your wealth than a news story on Brexit. There are plenty of things that go bump in the night, but only a few that require acting upon.