We live in a timing and selection culture where the majority of the participants in the game of investing believe and ‘optimize’ around superior market timing and investment selection.
As anecdotal proof of this concept… Yesterday, I received a request for a connection via LinkedIn. It was from a writer whose name I recognized.
Him: “I’d like to Connect via LinkedIn because I’d like your opinion on something.”
Naturally, I was excited – I’ve written a book, done the media tour and I know enough to know a media opportunity when I see one – the “opportunity” light went off in my brain.
Me: “Why yes, I would love to comment on your something… may I ask what you are looking for?”
Him: “Jonathan, I’m writing a piece for ‘income seekers’ and I am wondering if you have a favorite stock or series of stock screens you use to pick the best stocks for your income seeking clients?”
Me: (heavy sigh) ”No, no I don’t. I don’t think I (or anyone in my chair – or anyone in any other chair) can add value (meaning: improve client outcomes) through superior stock selection. There is no such thing as an “optimal” screen in an ever-changing environment. Good luck with your article.”
Him: “Well, what about an ETF or a mutual fund.”
Me: (single tear drops down right cheek)… to myself, “will they ever learn?”
I am challenged to respond to the what-individual-product-would-you-recommend for an income seeker (or any other category of investor) because I would never recommend an individual product. I see no value in the conversation about individual products until a plan is complete and even then, most individual products are inter-changeable within a category.
Even if I was enamored of a single income producing product, I have always discovered that no one is just an “income seeker” or “growth seeker.” Everyone needs a portfolio (a mix of different tools) specifically designed to help them reach THEIR planning goals – this obviously pre-supposes that we know their planning goals.
And… investing success is never determined by excellent market timing or product selection. Once the plan is complete and the mix of portfolio tools is in place, the individual’s success depends upon their patience and resilience in the face of the unknown. Successful plan outcomes demand that investors stay-the-course, precisely when doing so feels the most wrong.
I do have some overarching philosophies.
I keep to a dependable portfolio design process.
I even use specific tools consistently across portfolios.
But, I would never recommend a tool individually or even one of our (I think) excellent portfolios collectively without the eco-system of advice and communication to support the client’s behavior when they don’t work – which I absolutely guarantee will happen given a lifetime of our working together.
The media gets it horribly wrong when they try to steer their readers & listeners (our clients) towards optimal tool selection and improved market timing. No one can do it consistently. Full stop. Those who suggest there is a way to do it (which is 99% of financial headlines) muddy the waters of reality and make people hope for and even believe in the impossible – that they can ‘time and select’ their way to success.
This does not mean that we can’t build great portfolios and enjoy fantastic investment outcomes… it only means that timing and selection aren’t the levers we pull to get there.