Fun Facts Newsletter

Fun Facts Newsletter - June 2011

Breaking news report: The stock market is volatile.

Now that shouldn’t be news to you. Remember the following from last month and allow us to elaborate in what we hope will be your shortest summer reading ever:

1. We invest for expected returns, not past returns.
2. Risk and Return are Related (the 3 R’s).

We have had a sell-off or decline in the stock market for 5 weeks in a row now. In mid-March we had a sell-off followed by a rebound in late March and a very strong gain in April. Our crystal ball is no clearer than yours in forecasting next week or next month or the next 6 months.

When prices decline, future expected returns increase so selling after a decline is not a productive strategy.

Risk and return are related: Higher returns are earned in the stock market over time to compensate investors for the risk of uncertainty and shorter-term fluctuations. “Safe” investments like bank savings accounts and CD’s have very low returns that are unlikely to maintain or increase your purchasing power relative to inflation over time or provide the investment returns required to meet your long-term financial planning goals.

We continue to struggle with major economic challenges. There is no way to deny or debate that fact. Whether we will have a “double-dip” repeat of a recession or housing downturn is a subject for historians to document.

Our financial peace of mind is best achieved by managing what we can control and not worrying about the rest. A broadly diversified portfolio is a sound tool to weather any economic storm and participate in economic growth over the long run. We remain optimistic that long-term investors will be rewarded.

We are happy to report that Mary Dicker has a new title in our office. You can call her “Grandma.” Her first grandchild, Anthony, was born May 27th.

Enjoy these early summer days!