“It only takes two things to be successful at investing:  having a sound plan and sticking to it.  Of the two, it’s the sticking to it part that investors struggle with the most.”

• Warren Buffett

 

What does it take to achieve a secure retirement?  We all have many goals, financial and otherwise, but securing a comfortable retirement is one we all share.  It doesn’t matter if we are in our twenties and just beginning our professional lives or if we have already been enjoying retirement for 20 years.  What does matter is, have you defined what is important to you, what you will need, what you want it to look like?  Have you done a thorough assessment of your current situation and what you’re doing to improve it?  The time to start thinking, planning, and acting on this is NOW.  Before reading on, please take a few minutes and think about your vision for retirement.  What does it look like?

Did your vision of retirement include what is happening now in Europe, China, Japan, the Middle East, or Washington?  Or, did your vision include images of what you would be doing, who you would be doing it with, and how long you’d be doing it?  Having had the opportunity to work with so many of you for 25 years and more, we have observed that the most successful retirements are built focusing on these images rather than on global events which are short-term in nature (a serious threat one day, solved the next).  It is the big picture focus on what is truly important that protects, sustains, and inspires us to achieve what we set out to achieve.  Success is the result of a commitment to follow sound principles, not the crowd.  This is what guides our actions everyday as we help you plan and invest for the future you envision.

This commentary is a departure from what we usually send, and there’s a reason.  What we view as critical is how well we help you achieve your goals through planning and investing within the framework of a long-term relationship.  You see our primary concern is to come through for our clients and to do this by helping them come through for themselves.  This is challenging for all of us.  It is difficult not to be self-destructive in times of stress and uncertainty.  It is difficult to be patient.  To be successful, it takes surrounding ourselves with people who care about us, who will hold us accountable, and who have the competence, discipline and will to do so.   As vacations planned for the summer get underway, we hope there’s an opportunity for us to work with you planning for your future as well.  We are here to provide comprehensive financial planning which may incorporate other professionals you work with in the areas of tax, insurance and estate planning.  It is all part of the service we offer you.

We do want to make a few comments about what is happening in the world and its relevance to your investments.  With all of the uncertainty facing the global economy, we believe it is necessary, more than ever, to invest the way we do.  It is where the safety, value, and opportunity exist today relative to other investment alternatives.  Are we not concerned at all, you might ask?  Yes, we are concerned; you pay us to be.  More specifically however, you pay us for what we do with that concern.  It is proven that a little bit of fear is a good thing.  It is built into our nature for this reason.  It motivates us, sensitizes us, and drives us to protect ourselves and the ones we care about.  It is due to this level of concern that we focus on quality and value in the portfolio.  Too much fear, or allowing it to induce paralysis or panic, is not constructive.  Extreme fear is what exists at the top and bottom of markets.  At the top, the fear is of missing out and at the bottom it is of losing out.  In either case, it is responsible for the following data derived from the Dalbar Study.  Over the twenty year period ending December 31, 2010, the S&P500 earned 9.14% per year while the average equity investor earned 3.83% per year – not good when considering inflation over this time period was 2.57% per year.  The “average” investor from this study most often bought at the top and sold at the bottom in reaction to the news.  We are concerned about helping our clients do better than “average.”  We invest the way we do so we don’t have to panic in or panic out of the businesses we own because of news.  They will survive and grow stronger, they will continue to pay and grow dividends, and they will produce total returns well in excess of our fees and inflation.

What is an investor to do in times of extreme fear?  Act contrary to emotion, go against the crowd, be courageous, and invest.  The chart below shows 10-year rolling returns for the S&P 500 from 1920 to 2010.  The points near the 20% line represent the tops of markets (in 1929, late 1950’s, and 2000).  The points near the 0% line represent the bottoms of markets (in the late 1930’s, mid 1970’s to early 1980’s and today).  The question is, historically, when has been the better time to invest?

Source: Strategas Research Partners

Where is the best value today?  Where are the greatest risks?  These are the questions we ask ourselves every day as we manage the investments which we recognize represent your future and the means for you to achieve your goals.  Consider that in 1999, the S&P 500 earned $51.68 and traded at 1,469.25 at the end of the year, equating to 28 times earnings.  In 2011, the S&P 500 is expected to earn $99.00 and is currently trading at 1,320.64, equating to 13 times earnings.  This is the opportunity represented by the businesses you own.  These are the investments that we can stick to because we believe they give our clients the best chance of achieving a secure retirement.

What does it take to achieve a secure retirement? 

It takes:

 

1. Defining it.
2. Assessing your current situation and the actions you’re taking to improve it.
3. Building a support team around you.
4. Developing a plan that you can stick to.
5. Reviewing that plan with your support team regularly.
6. Making adjustments as necessary.

 

Thank you for the opportunity to be part of your support team.  It is an honor to be part of a relationship which requires us to care about you, hold you accountable and deliver upon the outcomes you desire through the use of competent investment management and comprehensive financial planning.

Best wishes for the summer,

Golub Group

 

Disclaimer: All opinions presented in this commentary are strictly those of the Golub Group.  You should not construe any implied or expressed conclusions presented as a promise of future returns.

 

 

 

 

(c) The Golub Group

www.golubgroup.com