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Successful investing in the stock market requires a significant commitment of time, energy, and attention. While most investors manage their investments part-time, true Portfolio Management differs from this approach. Portfolio Management, in reality, means hiring a team who spend their entire careers researching the markets and managing portfolios.
Most people don’t fix their own cars or learn to perform heart surgery. They hire people who spend their lives focusing on these skills. The same can be said for money management. While returns on stocks and bonds have been very rewarding over the better part of the last century, the majority of investors have not been successful at growing their wealth in the stock and bond markets on their own.
You may have seen the results, and maybe you’re wondering why investors have done so poorly in achieving market-like returns. We believe the answer stems from one main issue emotion. Emotion and not following a disciplined, systematic approach are the primary reasons most investors fail to match the general stock market indexes. There have been three major bull markets in the past 80 years, and each one has ended in a technology bubble.
In each case, stocks moved up too far too fast, aided by borrowed money and greed. When the technology bubble burst in the mid-1960’s, a long sideways market followed. By late summer of 1982, TIME magazine featured an article concluding that the stock market was like a Roller Coaster to Nowhere. It stated that the Dow Jones Industrial Average was 1000 in early 1966, but only 760 in August of 1982. With the real possibility we have entered another extended bear market, 18 to 20 years, which began in 2000, the need for managers who have demonstrated the ability to perform in sideways markets is crucial.