It’s always a pleasure to read Blackstone Vice Chairman Byron Wien’s annual 10 Surprises list. For breadth, open-mindedness, and contrarian thinking, Byron’s list, published since 1986, can’t be beat. But should you invest your money this way? Is Byron’s list, and those of less talented pundits, a reliable source of investment management guidance? I say no, and here’s why.
Pick your pundit, take your chance
When I see a headline like, “Wall Street’s Sharpest Minds Predict Where Stocks Are Headed In 2012” I read it, and then run. The article polled 16 experts whose 2012 forecasts for the S&P 500 have it closing the year at 1167, 1500 and everywhere in between. In other words, large cap stocks will go up. Or down. Or hold steady. Now how helpful is that?
I love that headline above because it typifies Wall Street’s relentless torrent of prediction in search of client money. Of course the media loves all the prediction too. It makes for great entertainment, just like a tarot card reader. But does it help investors? I don’t know how it could.
As for Wien, his 10 predictions for 2011 were about half right, as prescient as a coin flip. But he was only one for three on those that translated most directly to what to hold in your portfolio. He predicted gold at $1600 (Right!), the S&P up 20% to 1500 (It was dead flat), and the 10 year treasury yield surging to 5 percent (it fell from 3.3% to 1.9%). Anyone who saw wisdom in Wien’s ideas and abandoned treasuries in favor of large cap stocks (such as bond king Bill Gross) forfeited a hefty gain.
Control what you can, ignore the rest
At Osbon Capital we ignore predictions. Instead we focus on facts and factors we can control:
- Cost – this is an easy one. The more you cut your investment expenses, the higher your returns. Commissions, fees, and hidden costs are way too high in the industry, in my view. As an index boutique, we welcome and encourage cost auditing.
- Cash flow – another easy one. If you are waiting for your portfolio to appreciate, you can always collect dividends and interest. Interest rates are at rock bottom currently, but the $800 billion dollar global dividend stream is available to all. Selected index ETFs provide a low-cost means to access it.
- Taxes – easier than it may seem. We don’t know the future of tax policy but we doubt that taxes are going down. Our advice is to pay the least tax required. Again, index ETFs are built for tax-efficiency and give you significant control over your tax planning.
- Diversification and asset allocation – hard to do well. Substantial research, history, and modeling go into the construction and operation of a truly diversified portfolio. Using the powerful software tools of Windham Capital Management, the $30 billion advisor to endowments, hedge funds, and institutions, we build portfolios around your investment goals.
Tune out and tune up
For some, the constant investment news flow is entertaining. For others, it is distracting, and even harmful. Our advice is to get out of the news cycle and get into disciplined fact-based wealth planning. Flipping coins is no way to run a portfolio.
This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.
Nothing in this article is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.
Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.