March 2003 Newsletter

The Terrible Truth About Investing (Revisited)

Several years ago, when Deborah was helping her friend Bruce Temkin edit his book about investing, a big topic of discussion was of course the title. Fortunately another friend came up with the great suggestion of "The Terrible Truth About Investing," and that stuck.

After three years of losses in both large cap U.S. and large cap international stocks, and the bursting of the NASDAQ bubble in 2001, many of us are currently experiencing "the terrible truth" about investing: it is very difficult to do.

To quote from our colleagues at Sigma Investment Management Company (with permission and emphasis added):

"Most students of the financial markets know the road to success, yet few manage to travel it. Knowledge and action are different commodities. Many pay lip service to rational, diversified, periodically-rebalanced portfolios, but few can resist doing something else. There is always something more winsome — technology stocks in the late 1990's, Japanese stocks in the late 1980's, and "alternative investments" and hedge funds now. For the portfolio of an aging parent or the charitable foundation, the investor may insist on the diversified portfolio. But not for himself — after all, he knows what he is doing. By shunning what they know to be generally right, investors often wind up getting it precisely wrong. "In investing, greater effort and complexity often leads to lower returns." (January 2003 newsletter, The Tao of Investing)

"We do not know what stock or bond prices are going to do tomorrow, next quarter or next year. Neither does anyone else. The future of stock and bond prices, the economy, political trends and international crises are always unknowable, however much trouble people take to pretend that they can tell the future....we can know that the current bear market, as measured by the S&P 500, is the deepest and longest-lasting market decline since the Great Depression. The markets have already declined more than they did in 1973- 74, a period that included the OPEC oil crisis, the impeachment of the president, and both interest rates and inflation rates at double digit levels. Bonds are selling at lower yields than at any time in the past 40 years." (Sigma 2002 Fourth Quarter Market Recap)

It is harder than ever to stick with a long- term diversified plan for your investments. Dollar cost averaging into a declining market may produce better results in the long run but takes a lot of guts to do when it seems like all the money you put into your 401(k) for the year just evaporated. Call us if you are second-guessing yourself, need a pep talk or deserve a pat on the back!

In Memoriam

We are very sad to report the unexpected and untimely death in February of Carol Angel, CPA, ChFC. She was a good friend and excellent mentor to me and many others, and will be greatly missed.

Investment Boot Camp

The next workshops are:

Saturday, April 5, 2003 9:30-11:30 am
Saturday, June 7th 9:30-11:30 am
Saturday, September 6th 9:30-11:30 am

Please contact Mary Barr to reserve your space(s). We apologize if Saturdays
don't work in your schedule, but it has been the most requested day lately.

Silver Oak Giving Circle

The Silver Oak Charitable Giving Circle completed its first annual grants in 2002. By pooling our funds, we were able to give $6,000 to the Washington County battered women's shelter and $3,000 to Northwest Medical Teams for their free Dental-Mobile for low-income children.

We would love to grow the circle so we could give away more money each year. The annual commitment is $1,000 per family; the time commitment is 3 meetings during the year. This year our focus is local groups who are helping children at risk.

Another philanthropic organization in Cincinnati called Impact 100 has 123 "ordinary women" giving $1,000 each so collectively they could grant at least $100,000 each year to their community. Their goal is now 500 members, with the desire to bestow annual grants in five target areas — education, culture, environment, health and wellness.

Silver Oak's giving circle is meeting next on Sunday, March 9 at 3 pm. Call Deborah if you would like to join us.

Shifting Values

Many writers have been discussing some fundamental changes in investor behavior and sentiment that have shown up since 9/11. Before 9/11, we equated security with money. We knew that if we just had enough, we would be safe and happy. Now, we equate security with trust, relationships and family.

According to one survey, 73% of people these days are in "lifestyle triage." They are attempting to reconnect with what is important in their lives ... exploring their spiritual side and being more focused on ideas and values than making money for status. Another talks about "the claustrophobia of abundance" resulting from more than a decade of conspicuous consumption, and the "prosperity paradox," where consumers are admitting that once you get above poverty level, there is zero correlation between wealth and happiness.

In short, opportunities for happiness in the future won't be tied to the accumulation of more things; they will be tied to the perception that something is adding value to our lives. The answer to what is valuable will be different for each of us, but it is important to take some time to reflect on this and see what changes you can make to incorporate what's important into your lives.

Additional Links