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Using history as a practical guide – How to navigate decision making in the absence of facts
There is a TON of research coming out of the big shops on Wall Street – Goldman, JP Morgan, Credit Suisse, Merrill, Morgan Stanley…It’s written by smart, impressive people. I read some of it. I like it, but most of it is irrelevant to me.
“How,” you may ask, “could such sophisticated research coming out of the big shops from the brightest minds be irrelevant to you?”
Because I’m not the real audience.
And neither are you.
That stuff is written for the big institutions, traders, and their peers. It doesn’t mean I dismiss it. I’m just saying the average investor is not the audience.
While Monument is no longer affiliated with LPL Financial, I still hold their whole team in the highest regard – across the board, but specifically their research group.
They write real stuff for real people – data-driven and thorough, it uses history as a guide. It’s uncomplicated and elegant in its simplicity. That’s why I routinely refer to them and Bespoke Investment Group in my blogging.
So, with that, I offer the following – we’ve had a monster run off the stock market low and the market posted a 15-day gain of 22%…
Which was the biggest market gain over a three week trading period in history.
This chart from LPL shows the data. (Twitter: @lplresearch and @RyanDetrick)
I’ve always referred to “odds,” “data,” “probabilities,” and “time” when it comes to having the proper perspective on investing over the long-term…and maybe the inconsistency of terminology blurs my messaging on what I’m really getting at.
What I’m REALLY getting at is using history as a practical guide.
PRACTICAL.
GUIDE.
Not a definitive/ultimate/absolute/perfect/complete guide…but a PRACTICAL GUIDE.
Because in the world of unknowns, like now, practical is about the best you can do.
The chart is an example of using history as a practical guide. Looking back into history, you will see that 100% of the ten previous “Best 15-Day Returns Ever” periods are positive after 12 months with an average return of ~22%.
In fact, the 1, 3, 6, and 12-month returns are positive 40%, 60% 90% and 100% of the time, respectively.
That shows how time helps, and it’s an example of a PRACTICAL GUIDE.
I know this conjures up a lot of “ifs” and “buts” BUT, if “ifs” and “buts” were candy and nuts, life may indeed be a fruit cake (or something else), but the data and historical context are there to be a useful guide for long-term investors making the hard decision to remain optimistic.
And I’m optimistic about the future. I don’t know what will happen over the short-term, but I know this…
The Fed just injected three phases of stimulus that’s the equivalent of 11% of GDP. That’s a lot and the 4th phase getting voted on tomorrow is not even counted in that 11%.
Keep looking forward,
Dave
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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.
A copy of Monument Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.
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