The focus in today’s market frequently seems to be on index performance and on the major media outlets, a focus on “what’s hot”. The monotonous droning seems to drown out what is more important to the individual investor which is meeting their own personal goals. It also forgoes the notion of individual risk tolerance, but that is another topic for another time.
There are a lot of constraints placed on the business of advice, investing, and planning that the mainstream media blatantly disregards as they have no choice but a singular message that maximizes advertisement revenue. They are not doing this for your best interest, but to capture your eyes, boost your dopamine, feed you excitement or terror-depending on the day. Trot out super-bulls, then flip to Uber bears at a moments’ notices—ALL to sell more advertisements at a maximum dollar amount.
If there is good financial guidance, it is through actual advisors and perhaps a select number of long form podcasts that likely sound excessively boring in our world of immediate gratification.
There are simply too many hours in the day to fill with “financial news” and to offer anything remotely educational is not a sellable idea. So once the company news is run through at the top and bottom of the hour, they turn to the financial equivalent of the weather, and that is the economy, economic forecasts and numbers. IT’S GREAT!! Forecasts, released numbers, revised numbers, speculation on “what it means”, and every week has a sundry of numbers coming out. Following the economy and all the numbers the government and third parties release has literally saved mainstream financial media’s life. It is rarely dead on, easy to argue about, speculate what it means short term, medium term, long term, for the government, for the political candidates running for office, oh their are so many ways to run it, there is likely a white board in some back room dedicated to narratives, storylines, what ifs they can run!
Now for the fun part. Yes, the economy and the stock markets are connected, but loosely at best. Making investment decisions, trying to figure out directionality, or anything else is pretty speculative. Peter Lynch, the famous Fidelity investment manager of the 80’s and still a powerful leading force at Fidelity once said if a person spent 13 minutes a YEAR studying the economy, 10 minutes have been WASTED. He and many others find making investment decisions on economic news a poor choice. Current media would have one believing otherwise.
So another thought rattling through the financial spectrum that is oddly incongruent with what media frequently focus on and that is index investing is the only true solutions for most and everything else is pointless, tax inefficient, and gambling. I have mixed feelings about this, and I suppose the reason I do depends on what exactly you define indexing as. If you define it as solely investing in predefined pools of stocks grouped together by third party organizations originally for the purpose of creating a snapshot of a country’s health in terms of business, I disagree whole-heartedly. If you extend or expand the definitions of an index to mean a disciplined methodology of grouping stocks together having similar or common traits, I agree.
There are meaningful, important books regarding identifying and grouping stocks having multiple traits to improve one’s investment experience. No where in these books do that talk of using this as a trading strategy. It is a discipline aiming to finding the best stocks with certain traits. Some traits are value oriented, some are growth oriented, some favor small capitalization companies, others favor large.
The goal is to buy a large enough sample to reach a level of diversification and hold the group for a year for tax efficiency. I view this in a sense a sophisticated, custom version of indexing. And perchance if “what’s hot” shows up in these efforts, the good news is the discipline of the effort prevents overexposure, but allows for participation.
I am very excited to expand RASP Wealth Solutions investment solutions and modeling into this area. I have incorporated it in a very limited way for over ten years in my FQT portfolio I have managed at Merrill Lynch and UBS Financial. However, I am thrilled to open it up in a non-limited form. It offers a way to invest that provides diversification, is not market capitalization weighted, strives to be tax efficient, and is a component to help people meet their financial goals over the long term. While one can’t completely remove risk, for example systemic risk (9/11, the Great Financial Crisis of ‘08, COVID, war and other economic shocks), this portfolio through its diversification strives to reduce risk. By focusing on quality and strength in the underlying portfolio positions, the objective is to have some companies outperform in times of turmoil versus lower quality, weaker companies.
The great thing is I can mix this into several investment styles and I can account for risk levels by mixing in various amounts and styles of fixed income investments. I look forward to speaking with all who are interested in learning more about this approach. Contact us today to schedule a time to talk!
Jason W Rasp
RASP Wealth Solutions, LLC is an SEC registered investment adviser. SEC registration does not constitute an endorsement of RASP Wealth Solutions, LLC by the SEC nor does it indicate that RASP Wealth Solutions, LLC has attained a particular level of skill or ability. This material prepared by RASP Wealth Solutions, LLC is for informational purposes only and is accurate as of the date it was prepared. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Advisory services are only offered to clients or prospective clients where RASP Wealth Solutions, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by RASP Wealth Solutions, LLC unless a client service agreement is in place. This material is not intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. RASP Wealth Solutions, LLC is not an accounting firm. Please consult with your tax professional regarding your specific tax situation when determining if any of the mentioned strategies are right for you.