This is the hard part.


It would be nearly impossible to ignore the volatility and recent downturns in the markets. It’s no fun for anyone. Trust me, it’s no fun for us either. Our retirement accounts and business revenues are impacted when the markets are down as well. This is the hard part we all knew would come eventually. Investors have experienced a great run since spring of 2009. It was easy to forget about the normal market cycles when things were, for the most part, going up, up, up. Now that we’re experiencing another market downturn, it’s especially important to remember a few basics about why we invest and what the research tells us about investing over time.

First, no one knows what’s in store for investors tomorrow, next month, or next year. That doesn’t mean there won’t be a countless number of articles written by anyone with an opinion. A few of them may get lucky and be right in hindsight, but that doesn’t mean that they’d get the next prediction correct, or the next. If there was someone that consistently got all the market predictions correct, they would have All. The. Money!

Not even Warren Buffet bats 1000. He’s been very forthright about some of his swing-and-misses. Do you recall Greenspan’s “irrational exuberance” talk? It was made in 1996. It was 4 more years before the market saw a down year. And 2002 when Bill Gross said the Dow would drop to 5000? Even in the middle of the worst market since the Great Depression the Dow never dropped to that level. Then there was Abby Joseph Cohen who was bullish in 2008, even as the crash was happening around her. They are all intelligent and successful people that have worked for decades in the details of economic and market movements and still couldn’t predict well.

So, we won’t try to predict. It may get worse before it gets better, or we may be able to think back on 2018 as just a bad market memory soon. No one knows for certain.

Second, it’s important to take a step back and realize that we can only control what can be controlled. What’s controllable? Our asset allocation, our continued contributions, keeping our fees to a reasonable level, and the information we consume.

We’re often our own worst enemies when it comes to investing. Our own human nature can easily get in the way of a perfectly rational portfolio strategy. It’s easy and normal to feel confident and willing to take risk when the markets are up. It’s also easy and normal to feel a bit of panic and hesitation when markets dip. It’s perfectly normal to feel that way– but acting on impulses rather than sticking with your strategy can hurt long-term results.

I half-joked with a client recently that my job during good times was to remind them it will get worse, and in bad times to remind them that it will get better. That’s obviously too simplified, but there is an element of truth to it. 

Third, remember why we invest. We invest because we want to at least earn a rate of return that exceeds the impact of inflation over time. If we’re willing and able, we can invest to target an even higher rate of return over a longer period of time. We know that risk and return are correlated in a diversified portfolio. If the long-term returns didn’t compensate investors for the risk taken, no one would ever invest.

We’ve all seen the risk tolerance questionnaires and charts. What many of those charts don’t show is the volatility that can occur at any given level of risk. One of our favorite reports does show that! We share it during nearly every client review. It shows a back-test of how the portfolio (or similar) would have performed in several of the last few market downturns. That creates a meaningful conversation, realizing that the future will never exactly replicate the past.

Risk can be measured by a number of metrics, but to keep it simple, we’ll just focus on the top driver: asset allocation. Generally speaking, the higher percentage of equities (stocks) we have in a portfolio, the higher the portfolio’s risk metrics will be, and the higher the long-term expected rate of return will be. By long-term, we mean 10+ years.

Very few investors are comfortable with 100% stocks – for good reason. The volatility that can be experienced is quite extreme and can shake the nerves of even the most risk tolerant among us. It’s true too that very few investors are wealthy enough to put all their money in a CD account and live on the interest, especially at recent rates. So, therein lies the rub. We must find the balance between the risk we’re comfortable taking, and the rate of return we need to realize our goals.

 Here are some statistics that were recently shared via Vanguard:

Chance of a positive return for different time periods:

One Day: 54%

One Week: 58%

One Month: 64%

One Year: 82%

Ten Years: 91%

From January 4th, 1988 through December 31st, 2017 based on Vanguard calculations from Bloomberg.


Also, timing the market can prove to be a challenge since volatility means big moves both up and down in short periods of time:

-          Twelve of the twenty best trading days occurred in years with negative annual returns

-          Nine of the twenty worst trading days occurred in years with positive annual returns.


·        All investing is subject to risk.

·        Past performance is no guarantee of future results.

·        The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

From Vanguard based on S&P Index daily returns, Dec. 31, 1979 through Dec. 31, 2017.

With just these small insights, we know that the length of time being invested increases the likelihood of a positive return, and that short-term volatility doesn’t tell the whole story and it’s not always predictive. Even more, the best and worst days are often close together (for an example, see last week!).

What can we do with this information?

Evaluate your current circumstances. If you have a solid plan in place now, realize that this too shall pass - eventually. That can feel really tough sometimes! We’re not suggesting completely ignoring the portfolio. Over the last couple of weeks we’ve rebalanced many portfolios and taken some strategic losses (if you have a loss, you may as well take it and save a little on taxes if you can!). It simply means don’t try to out-think the market.

Or, if you’re willing and able to take a little more risk, downturns can offer an opportunity to purchase investments at a lower price.

Either way, stay consistent with the financial basics: keep an emergency fund, reduce or eliminate the interest expense of debt, contribute to savings goals, make the most of employee benefits, be tax efficient, keep a positive cash flow, and monitor needed changes for estate planning and insurance needs.

If you fundamentally feel that your current plan isn’t where it needs to be, and it’s more than just the normal volatility and downturn jitters, then it’s time to create a better plan for your future. We can help with that, and it would be an honor! We love what we do, even in challenging times.




None of the information provided here is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Please work with professional advisors to determine the best course of action for your circumstances.


A brief introduction to Impact Investing.

Globe in Hand.jpg

Impact Investing – you may think it’s a new buzzword, but it’s nothing new. It has been around here in the U.S. since the 1700’s and there are many examples of specific investment mandates by many religions for millennia.

Many investors want to be sure their investments are aligned with their values. In recent years, these strategies have become more prevalent. It’s always important to keep the core principles of investing (like diversification, risk management, and fee management) at the center of portfolio construction, and thanks to more options in the last several years, that’s more possible than ever before.

Here are some common impact investing strategies:

Most people would choose to use mutual funds and/or ETFs to achieve broader diversification than what most investors could achieve by using individual stock or bond holdings, so we’ll focus on mutual funds and/or ETFs for now.

Impact Investing is a broad term that is a bit of a catch-all for the category. Within it, you can have any number of screens to determine the right investment strategy to have the impact you’re looking for.

Impact investing may be as simple as choosing to shop locally, or purchase items from businesses that support or advocate for causes that are near and dear to you. It can also mean choosing to invest in companies that share these values and put them to work in their own business practices.

Socially Responsible Investing

The most common form of this kind of investment uses a negative screen to pull out industries associated with alcohol, tobacco, and gambling. Some may also screen out firearms or companies involved with the production of weapons.  There are others that may use a positive screen to invest in companies that have certain worker policies, or show dedication to human rights.

For example, if you’re interested in learning whether a certain fund invests in firearms, there’s a site that will tell you:

Sustainable Investing

Many investors are interested in choosing businesses that promote environmentally friendly business practices, promote preservation, or have governance practices that are aligned with sustainability. These goals may be accomplished through a variety of means, depending on the industry or business involved. It could be a company that offers carbon offset credits, or purchases them for their own activities. It could be a paper company with strong practices tied to the sustainable harvesting practices of timber. There are companies that are focused on developing new advances in solar, wind, or water energy. There are a number of ways to invest in sustainable businesses.


Today there are more choices than ever before, which can be both good and bad. Good, because more specific screens can be applied to reveal investments that are aligned with specific values. Bad, because it can be difficult to decode all the language different investment companies use to develop those screens. 

Each fund manager can choose how they develop the appropriate screens for their fund, so it’s important as an investor to understand the differences of philosophy on how companies are included or excluded. For example, one fund has decided to base their screens on percentage of revenue derived from the exclusion list parameters. So, if a company still sells the offending item, but derives less than 10% of revenue from it, the company may still pass the test and be included in the fund.


We work with our clients to determine the best portfolio for them. It may not always include any of these options, but when it does, we’ll help guide the process to be sure there’s a good match!