We are back from our annual trip to the Grand Canyon. I shot a video at the North Rim but somehow it failed to upload to YouTube. It was short so I'll just recap what I said in writing.At some point I heard a Tony Robbins commercial on CNBC on satellite radio and believe it or not he said something interesting about innovation in trying to sell whatever it was. He asked a question like what have you done that is innovative that will help your clients?
If you manage your own portfolio you then are your own client and obviously if you are an adivisor of some sort then you really do have clients. Either way what are you doing that is innovative that will help you have enough money when you need it? Clearly the recently ended decade required innovation to avoid being down twenty whatever percent. It seems as though the new decade will require innovation. That does not have to be a prediction of another down decade but what if ten years from now the S&P 500 is only at 1402--20% above yesterday's close? That wouldn't get it done for most folks.
I think it is fair to say this site has devoted a lot of time to exploring innovative ways to build a portfolio and I think this exploration has hit on some interesting things some of which have helped our clients. And while any innovative ideas that might have contributed to our result is all well and good the process of seeking innovative ways to construct the portfolio must continue by necessity. It cannot be assumed that just because some product or country or niche worked in the last five years that it will work for the next five years. This makes the task both exciting and possibly daunting but either way I am convinced innovation in portfolio construction will continue to be crucial.
One point I made in the video was that diehard indexing, though it worked in the 1980s and 1990s, is not innovative. This is an interesting take on all of this. In business do you believe in innovation? That might be framed in a way where saying no is impossible but in a very serious manner, is do-it-yourself portfolio management a business? If it is, then what role should innovation play?You know how I feel about this so this becomes a chance for you to look yourself in the mirror and decide for yourself.
3 comments:
Excellent point today.
I recall that shortly after my mother had cataract surgery and looked into mirror,she recoiled and exclaimed "I didn't know I had so many wrinkles". She was 95 at the time, so it does beat the alternative. If investors look at their portfolio from a perspective of clarity and objectivity (not being married to an investment), reality will rule the day - and adjustments can be made.
The mirror should be reflecting the present - not the rear view mirror of the past.
Tony Robbins. Ha. There should be some website featuring "pitchmen, where are they now."
T
Innovation - I don't see a lot of true innovation. For example, I don't see a huge difference between mutual funds and ETFs. Now trading for free IS an innovation.
Here is an article suggesting that we should be careful about emerging markets. http://finance.yahoo.com/news/Be-wary-of-emerging-hmoney-2123152046.html?x=0&.v=1
It's interesting because it seems to assume that people invest blindly, without 'looking under the hood'. Of course it is from Money magazine so maybe people who read things like that DO invest blindly!
Innovation? I'm not sure I do anything innovative, but I think I've found a 2 strategies the maximize gains and reduce risk. What I've learned and practice seems to work.
1. I don't know where the stock market is headed, and I don't need to know to be successful.
2. Marketing timing is a better risk reduction strategy than broad diversification/buy and hold.
3. Mechanical, model-based systems work (at least for me) so long as you separate research and model construction from execution. These days I spend 100% of my time, 2 hours a week on execution and rarely watch what the markets do on a daily basis.
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