Investment Thoughts Q1 2021

Highlights in this issue:

GameStop Holds a Financial Lesson For Kids: Investing is Supposed to Be Boring - The Washington Post
Is College Still a Good Investment - Kiplinger.com
Curling Up With a Good Book - Recommended Reading from Buttonwood Staff

Dear Client,

Do you consider yourself a good driver?  If not, kudos for your honesty!  Studies consistently show a statistical anomaly where the vast majority of respondents classify themselves as “above average” on the road.  One of the more recent, a 2019 survey of American drivers by Esurance, put that figure at 76%.  A full quarter who believed themselves “above average” would be statistically classified as “below average” and proven wrong in their self-assessment.  Was this discrepancy caused by a lack of awareness?  Unlikely, as when asked about unsafe driving behaviors such as speeding, texting or eating behind the wheel, a whopping 93% admitted to engaging in at least one of the behaviors!  Perhaps they considered themselves such above average drivers that behaviors that were proven deadly to the general population posed much less of a risk to them individually?

For better or for worse, a similar sentiment can take hold of investors during bull markets.  When risk-taking is rewarded and almost every gamble pays off, the behaviors previously recognized as dangerous are reinforced as being harmless.  It is in this light that we watched the recent excitement over GameStop (see the article on page 3 for more) and other “hot” sectors of the market.  We’ve seen these stories before, and we know how they end (each of us has at least one “hard-learned lesson” from personal experience to look back on).  It’s exciting and you may arrive at your destination sooner if you drive 90-mph in a 55-mph zone - but do so consistently, and it’s only a matter of time before you are pulled over for speeding or end up in a crash.

 The original question (“Are you a good driver?”) was on my mind because my oldest son has his learner’s permit, and I’ve had to become comfortable relinquishing control while sliding into the passenger seat.  It’s given me a newfound appreciation for my better driving habits – and increased awareness of those not-so-good ones!

When it comes to your planning and portfolio, you have entrusted us to be the driver and we want you to be comfortable with our “personality” behind the wheel.  We choose our vehicle based on its reputation for safety and reliability (think a Toyota or Subaru), choose the quickest route and target a pace just above the speed limit (75 mph on the Interstate).  We strive to limit the risk of a major setback (ticket, accident or breakdown) while realizing there is value in arriving at your destination as expeditiously as possible. 

 For those of you who like to “read the owner’s manual,” we’ve included a wonderful selection of books (page 7) to enjoy outside on a nice Spring day.  Hopefully they will allow you to develop a good investing behavior or two!

 Finally, regular maintenance is as important for your financial plan as it is for your vehicle.  If you think it is time for a tune-up, please give us a call.  Meetings can be scheduled via phone, Zoom, or (masked) in-person; we’d love the opportunity to catch up!

Sincerely,

Greg, Jodie and Chris