I receive virtually the same call, from different clients, roughly once a week. They all begin by asking how I am, and the same of my wife and daughters. Then they apologize for interrupting my day (which would be impossible), but they have a quick question that they really don’t know how to ask. Basically, asked in numerous ways, the question is this: “I see on the news that ‘the market’ is at all-time highs. Why isn’t my account growing the same way?” Certainly a reasonable question.
To illustrate the reason, my mind goes to a forest and trees. If I owned a tree farm, it would be a reasonable question for the farm manager why all of the trees, having been planted at the same time and having the same growing conditions, are not all growing like that one that is half again as tall as the rest.. His response would probably reflect that over the entire plot there are variations in soil quality and drainage, but most importantly while they are all trees, they are not all the same tree species, on purpose. The farm manager reminds me that I had instructed him to plant a variety of tree types, so that a disease of one variety didn’t wipe out the entire operation. He tries his best not to say it, but he reminds me with a crooked smile that I am missing the forest for the tree.
The parallel is that not a single client in over 30 years has instructed me to position their life savings so that as long as we had the optimal investment climates, favorable tax and regulatory policies, enough but not too much inflation, as well as long and uninterrupted growing seasons, then they would have adequate fruit for the summer and firewood for the winter. My instructions have been more along the lines of, “I don’t need to be rich, just don’t let me be poor.” Our best defensive weapon from a blight running through a portfolio of assets or agriculture is diversification.
So, it is most likely the person that asked the question has some portion of their portfolio in the sector of the market that is currently seeing great growth, some that is doing well (but not setting records), some that may have marginal growth, and possibly some even that appears for this season to be dying. The important thing to remember is that neither the farm nor the finances were put in place for the short term.
One closing thought. Research indicates that while the tallest trees look the most majestic, they do not yield the most fruit, as the energy of the tree is being used to produce the physical structure to keep itself upright rather than going to produce fruit. That leads us back to the philosophical question of what do we want the tree/treasure to provide for us, food or shelter? The answer to that is in a whole other newsletter and a different analogy. We will just leaf it right there, for now. Too acorn-y?
All the best,
Bryan Trible, CLU, CRPC