The DCA Dilemma

In this video I will discuss whether to invest your money all at once or to dollar cost average over time.  Now is the perfect time to have this conversation as there is a lot of uncertainty about what will happen next.  The market is coming off an almost 40% decline in 2 months followed by an almost 40% increase in the same period.  This level of uncertainty in the market and angst among investors elevates the age old question should invest all at once or over time.  Invest now and fear another market decline and immediate loss?  Or wait and watch the market continue to climb to new highs and fear the regret of missing out?  These are not easy questions, so let me walk you through my thought process and how I view this. 

Let me briefly explain what Dollar Cost Averaging (DCA) is, I will contrast that with just simply investing all at once.  Let’s say you have $1 million to invest, you could either invest all $1 million at once, or invest it slowly over time.  Typically, you take a % of the money and specific amounts of time to invest.  For example, you might take 20% per month over a 5 month period essentially investing $200,000 per month and in 5 months all $1 million has been invested. 

It’s fairly easy to understand that if the market DROPS over that 5 month period of time you will be better off by Dollar Cost Averaging in as you continue to buy at lower prices with each chunk of money you invest. 

On the flip side if the market GOES UP over that same period of time you would have been better off just investing all of it at once. 

Hindsight is always 20/20 but predicting where the markets or stock prices will go in the future is somewhat random and what we believe is almost an impossibility to predict.  Given that information you could call it a flip of coin on which strategy will work out better in the short run.  We believe it is best to base financial decisions not off the outcome (which is somewhat out of our control, i.e. pandemic) but rather on the decisions we make based on the information we have.  We know that short term stock Randoms are very noisy and somewhat random AND that the stock market has roughly a 50/50 chance of going up vs. down in small periods of time.  However when you add in the assumption of positive returns   (otherwise why would we invest) we believe financially you will be better off by going all in, at any point in time.

Unfortunately, it’s NOT that simple.  Just because something makes more sense financially doesn’t mean it’s the right thing to do.  On the contrary I believe investors will have a better EMOTIONAL experience when it comes to investing by dollar cost averaging.  The rationale is simple.  We respond much differently to losing money (even if it is short lived) than we do to the regret of missed opportunity.  Part of a successful investment plan is one that allows you to be disciplined which requires you to have a good experience.

The reason we spend so much time understanding our clients before they become our clients is because not every decision needs to be based on what’s best financially but rather on what makes the most sense for you. 

If you’d like to have a more in-depth conversation, please click here to schedule a call. 

Don't Let a Recession Faze You

In the past century there have been 15 recessions in the US. 11 of those instances, stock returns were positive two years after recession began.

• Investors may be tempted to abandon equities and go to cash when there is heightened risk of an economic downturn.

• But as research has shown that stock prices incorporate expectations of recession and generally have failed in value before a recession even begins.

• The average annualized return two years after the onset of these 15 recessions was 7.8%

• A $10,000 investment at the peak of the business cycle would have grown to $11,937 after two years on average

No More Predictions

I’m officially out of the predicting business!

Did you know that long term government bonds averaged 8.89% over the last 10 years? It’s true. While this is a function of interest rates dropping over that period of time, pretty substantially I might add. There was not a person I talked to over the last 10 years who was convinced that interest rates would fall from where they were. In fact it was quite the opposite. Bonds are never as sexy as stocks so using those predictions are not as fun but my point is making predictions is really, really hard.

As for where we go from here. Yes we’re officially in a recession (whatever that means) and if you look back at history in the last 100 years there have been 15 recessions total. Of those only 4 instances did it take longer than 2 years to fully recover and reach new highs from where the recession started. Yes 2007 was one of those 4, it took almost 5 years to recover from that. Click here for a great article “Don’t Let a Recession Faze You”

So where do we go from here? I haven’t the slightest idea of how long it will take us to recover. Of course I have my own feelings about what happens next but using those feelings to make a prediction and then ultimately influence my investment philosophy would not be a wise idea. I can tell you the feedback I’m getting from my own clients is almost split 50/50 Half think this is going to be a 5-10 year recovery period and some think we could see new highs within 12 months. The important thing is that we stay consistent, have discipline, and stay the course. Discipline and Patience are some of the best ingredients to being a successful investor.

If you have a question concern or even a prediction you want to share with us and talk through click here to schedule a time with Mike or myself. Have a great weekend!

Portfolio Structure

I’m too old and don’t have time to wait for a recovery?


Lately I’ve received a lot of questions from clients and non clients such as:

• I don’t have time for the markets to recover?

• Am I too old to take risk?

• I’m not a long term investor anymore because I retired…

Even with the safest portfolio we still need the ability to keep up with inflation.  Someone retiring at 65 still needs to have a plan to double their income throughout retirement as things double every 30 years based on inflation of 3%

What I’m hoping this video does is in a simple way is help you understand how we structure a portfolio based on your age, stage in life and tolerance for risk so that you withstand the market ups and downs and meet all of your goals.   Your portfolio is made up of very stable non volatile assets (bonds) and assets that provide a higher return potential but offer more short term volatility (stocks).  No matter your age a well structured portfolio will have both stocks and bonds and sometimes for different reasons. 

Its very easy to look at your statement and see whether you made money or lost money. Is your account is “up big” or “down big”.  Regardless of whether it’s up or down there are different components in the portfolio all contributing in their own way.   

We design your portfolio thinking about your risk tolerances as well as your cash and income needs.  We know that markets will go down and that it will feel awful.  We also, know markets will go up and it will feel great.  The trick is building a portfolio that you can maintain over time so that you get the returns that your portfolio will generate.

We know what your expected return will be when we design your portfolio.  Your actual return will be delivered based off how well you stick to your portfolio through good times and bad.

No Free Lunch

Guess What? There is NO FREE LUNCH.    

I saw an advertisement today saying guaranteed 12% return.  Really? I thought who doesn’t want 12% guaranteed? Obviously it’s not as good as it seemed…It does reminded me how good investment companies are at marketing new products, new ideas and peddling them to investors. 

Unfortunately for consumers, now is the time that these investment companies ramp up their marketing engines and create new products that promise to offer only upside and eliminate the down.  The same thing happened in 2008-2009 when I (as I’m sure you were to) was flooded with new investment strategies and products that promised to ease the pain and anxiety were were feeling at the time. After all pain is the greatest motivator to action. Bad news for us is we’re going to start seeing those same ads again in the wake of what we’re going through now.   I wanted to bring up this topic so that you’re aware of this and take it all in through the same lens that I do

The problem is, when it comes to investing, it’s probably the most competitive environment there is, after all it deals with money. There is no crystal ball, it doesn’t matter where you went to school or how hard you try, markets work.  They do a great job at pricing securities in such a way that matches risk and return and sets prices fairly and instantaneously.

While we will continue to evaluate all investment opportunities out there for you, we will never pitch a product or try and sell you something just because it sounds good. Our investment offering matches squarely with our investment philosophy which will NEVER attempt to predict the future or outguess others.  Instead we draw information about expected returns from the market itself.  We rely on information that is sensible, persistent over time and pervasive across markets.  You can see below our core beliefs when it comes to developing investment portfolios that will last overtime.

• Markets Work

  • Capital markets do a good job of fairly pricing all available information and investors expectations about publicly traded securities

• Diversification is Key

  • Comprehensive, global asset allocation can neutralize the risks specific to individual securities

• Risk and Return are Related

  • The compensation for taking increased levels of risk is the potential to earn greater returns

• Portfolio Structure Explains Performance

  • The asset classes that compromise a portfolio and the risk levels of those asset classes are responsible for most of the variability of portfolio returns

Having core beliefs and an investment philosophy that’s rooted in science helps us stay disciplined through good times and bad. You can always read more about our investment philosophy by clicking here but know that the one of the first things that goes through our mind when I see new ideas is that THERE IS NO FREE LUNCH.

If you have any questions or need to schedule a call to talk with either Mike or myself click one of these links below..

Schedule with Ryan

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Have a great weekend!