Your Survival Guy

Preparing your investments and family for when disaster strikes.

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Your Investment Success or Failure May Come…

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Your investment success or failure may come from how you invest, not necessarily what you invest in. As you know, the pangs of pain from losing money far outweigh the euphoria of making it. We are human. We like to win. We hate to lose. Why, then, do we tend to invest in areas that are going up instead of areas that are going down and offer good “value?” FOMO or fear of missing the boat?

To understand risk and reward, I’ll point you to the efficient frontier. The Efficient Frontier, created by Harry Markowitz in 1952, measures the efficient diversification of investments that delivers the highest level of return at the lowest possible risk. Note that in my efficient frontier example above, I’m using a diversified, dividend-oriented stock index and a shorter-term bond index spanning 3-5 year maturities—one or two stocks are not diversified, nor are a bond or two. Also worth noting is that this comparison begins this century, one that has been manipulated by an interventionist Federal Reserve beginning with Mr. “Irrational Exuberance” Greenspan, then Mr. “Helicopter Ben” Bernanke and the others to follow.

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In my conversations with you, we talk about asset allocation. We talk about bonds—an area that tends to be woefully underrepresented like a Main Street voter and equities that are represented in index funds controlled by the big three asset managers, Vanguard, BlackRock, and State Street, who vote your shares for their political gains. Once a passive way to invest, indexing is now like a powerful PAC for the 800-lbs. gorillas.

Action Line: Run your finger along my efficient frontier and see where you would have felt most comfortable. When you’re ready to talk, let’s talk.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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