The below comes from my quarterly letter to clients that just went out this morning.
Our strategic asset allocation strategies were designed based on our core philosophy:
investors are compensated for the risks they bear
some risks pay better than others
prices contain information
performance is mean-reverting
the future is unknowable
the past is a good guide
compounding is magic
less is more
These are the big ideas. The impact they can have, if adhered to over long periods of time, cannot be overstated.
Paying lip service to these ten big ideas is the easy part. Showing investors how they actually pay off over time and then living with them through the moments when they seem “broken” – that’s the trick. This is the work that good advisors do – implementation and communication matters a lot.
I wish someone explained this stuff to me when I was in my twenties. Or perhaps I had to learn these truths the hard way.