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2020...The Year That Taught Us All That Discipline Makes a Good Investor

On January 3rd of 2020 I responded to a client email who was asking about advice she received from a trusted family member. The advice was centered around her taking a less diversified approach and to “push it a little” because of the good year stocks would have in 2020. Below is an excerpt of the email:


Hi (client), First, I need to remind you that no one knows that this next year will be a good year for stocks. No one...not me, not people on the news, not your friends or family have any idea what the stock market will do (I've been at this for 22 years now...everyone just guesses and they sell bad information in the media). Second, there are about 19 different stock markets across the globe that we invest in...so which market is due to do well in 2020? Again, no one has that information. Happy New Year! Joe

That was JANUARY 3rd, 2020 Two months later we were battling the emergence of something the media was referring to as the Wuhan Virus and sports leagues were shutting down. Within a few weeks after that, we were ALL shutting down. The world was at a standstill. It is weird to think back to this time because it wasn’t really that long ago and yet it seems (to me) to be 3 years ago. Kids home from school; events cancelled; flights cancelled; work cancelled; life itself was essentially cancelled. As of December 2020 the world is fundamentally different and may not ever get back to the same that we knew before. We will travel different. We will communicate different. We (hopefully) will pay attention to our own health different. Fear. Anger. Anxiety. Disbelief. Frustration. It was like a dystopian movie had been thrown at us and we were all actors in some odd and bizarro world. Markets crashed. By April 1st, an equity-based portfolio was on track to lose a substantial amount of its value1

May 2020

By May, a rebound in the markets around the globe had already begun, however most were not aware of it. March and April had many of my clients asking if we should get out of the market completely. Media was telling us it could take YEARS to rebound. A “V” shaped stock market recovery touted by the Trump administration was laughed at by those “in the know”. The fact that a negative 80% portfolio was unlikely to happen was ignored by just about everyone. The simple statistics around a properly diversified equity portfolio to be down 80% at year end would be so far outside the range of any normal standard deviation that I knew it was incredibly unlikely to happen. But the media didn’t care... More fear. More disinformation. More trouble for portfolios and for people.

Only it never happened!

As the media and others told my clients that the market was not coming back any time soon, something unusual happened. Financial Armageddon predicted by so many simply turned around. Markets continued to rebound. I’m not suggesting the American economy doesn’t face significant headwinds. I am, however, pointing out the very real fact that the world’s stock markets made a comeback for the ages. Something I think will be the proudest moment of my career happened during this roller coaster ride: my clients didn’t waiver. YOU did not waiver. Even now, while writing this, I am a little emotional about it all. At the time of this writing (December 21, 2020) I advise 135 families. You listened to me describe how I was literally watching the markets around the globe every day and then watching to see how your portfolios reacted. I was on the lookout for anything that appeared “broken” in the portfolios. You trusted in me and you remained disciplined.

At the end of the day, you could have moved your money to cash. You could have scrapped the financial plans we spent time building. You could have forgotten the insurance portfolios that had cash in them to help in times like these. You could have listened to everyone else out there, but you didn’t. You “zoomed” in and met with me virtually. You listened to my podcasts. You read my blogs. You attended my webinars. You really asked questions. Most importantly, you trusted.

And the discipline paid off

Here we are, what seems like light years away from an email I wrote on January 3rd of this year. An email where I was responding to a question a client had from her family member who felt she was “too diversified” and that stocks were due for a HUGE year. I highlight that email because it shows a principled approach to building and maintaining portfolios. I don’t predict. I don’t speculate and I don’t gamble with your money. What right would I have to do that?


Rather, I take a time-tested approach where we use a globally diversified equity portfolio and offset any risk with high quality, short term fixed income. And I don’t panic. And YOU didn’t panic. By the end of the year (as of December 21, 2020) globally diversified equity portfolio sare positive for the year. POSITIVE. In a year when the world stopped turning. I have no idea. No one does. Not the media, not your family, no one. If you ever hear me say anything different, you should fire me on the spot because I’ve lost my way. I can tell you this: in a career reaching into it’s 23rd year now where I’ve been through contested Presidential elections (two of them now), the worst terror attack on American soil, the Great Recession, Brexit, the 2016 election, a Presidential impeachment and now a global pandemic, one thing I will not lose is my way. I have principles that have been tested in the trenches. I have colleagues around me who I would have in my “foxhole” anytime and anywhere. And I think I have the best clients in the world because while you know I can’t predict the future, you don’t ask me to. You simply look to me for my experience and guidance.

No matter what 2021, or any of the years after that may bring, I am honored that you “let me worry for you”.

I wish you all a peaceful end to this year and a healthy and happy New Year.

Best wishes, Joe DeLisi, CFP®, ChFC®, CExPTM


1. Numbers sourced from internal audit of client portfolios, additional details available upon request. 2. Source: S&P 500 Index YTD analysis. http://bit.ly/3rn3crz | This material is intended for general public use and is for educational purposes only. By providing this content, Park Avenue Securities LLC is not undertaking to provide any recommendations or investment advice regarding any specific account type, service, investment strategy or product to any specific individual or situation, or to otherwise act in any fiduciary or other capacity. Please contact a financial professional for guidance and information that is specific to your individual situation. All investments contain risk and may lose value. Diversification does not guarantee profit or protect against market loss. | Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 4275 Executive Square #800 La Jolla, CA 92037 619.684.6400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. | CA license number 0D34103 | AR license Number 307935 | 2020-113849 exp 12/22

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This material is intended for general public use.  By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity.  Please contact one of our financial professionals for guidance and information specific to your individual situation.

 

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 4275 Executive Square #800 La Jolla, CA 92037 619.684.6400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC.  WestPac Wealth Partners, LLC is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor.

 

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