“Those who follow the crowd tend to get the same mediocre results as the crowd, while those with the courage to be different tend to thrive and distinguish themselves from the crowd.” – J. Fournier
The above quote has applicability in all walks of life, but as someone who has spent 28 years in the financial services profession, I see its applicability to the world of investing almost every day. While most individual investors still follow the crowd down the path of stock, bond, and mutual fund investing, many investors are choosing to expand their horizons and learn more about why a portfolio limited to just stocks and bonds may not be the best way to maximize long-term performance or maintain acceptable levels of portfolio risk and volatility.
Yes, it’s very easy to follow the crowd when the stock market has been on a 7-year bull run, but following the crowd can lead to regret when an extended bull market slows down or market interest rates start rising again. As of the date I’m writing this article, the Dow Jones Industrial Average is only 25% higher than it was when it closed above 14,000 for the first time on July 19, 2007, over nine years ago. Great short-term performance over the last few years . . . but very mediocre performance over the last 16 years.
And while the masses of individual investors continue to read the financial magazines full of mutual fund ads, listen to the plethora of radio/TV commercials that promote do-it-yourself investing and automated “robo-advisors”, and blindly ride the ups and downs of the stock and bond markets, there are plenty of other investors who have learned to deflect the noise, include other asset classes in their portfolio, and sleep well knowing that the performance of their multi-asset portfolio is not solely dependent on the stock market. Commercial real estate, private equity and renewable energy are just a few examples of asset classes that can complement a traditional stock/bond portfolio to help reduce portfolio risk and volatility.
A decade ago it was more difficult for individual investors to build a solid multi-asset portfolio that’s similar to that of a billion-dollar institutional investor, but changes in technology, the evolution of investment products, and the emergence of revolutionary money managers have made it possible for individuals to invest $100,000 in a way that’s similar to how an institution might invest $100 million. At Brookwood Wealth Management we help our clients to escape the mindset of the masses and to forge their own path to successful investing.
Alan is President of Brookwood Wealth Management in Brentwood. He can be reached at his office at (615)513-6605 or via email at email@example.com.
*Past performance is no guarantee of future performance. All investments involve risk, including possible loss of principal. Investment advisory services offered through Center Street Advisors, Inc. (CSA), an SEC Registered Investment Advisor. Securities offered through Center Street Securities, Inc. (CSS), a Registered Broker/Dealer and member of FINRA and SIPC. CSA and Brookwood Wealth Management are independent of CSS.
Written By: L. Alan Hardee