Dimensional

Dimensional’s Quarterly Market Review (Q3 2018)

DimensionalAre you speed-dating or in an ideal marriage with your investment portfolio?

As Dimensional Fund Advisors’ Quarterly Market Review reveals on its summary page, investors have much to appreciate this quarter, with positive returns from U.S. and international developed stocks. Still, “appreciation” is relative; there’s always some asset class outperforming its counterparts – and some underperforming.

So, let’s address a question I’ve been hearing:

“My globally diversified portfolio has been underperforming the S&P 500. Should I ditch my ho-hum bonds and international holdings and pile into U.S. stocks?”

To this query, I pose a question in return: Are you speed-dating, or married to your investments?

This is not a trick question. I hope it’s obvious you’re best off “married” to your wealth. On a first date, if you don’t quickly click, it’s goodbye and good riddance.

In an ideal marriage, you’ve moved past first impressions and taken the time to determine that your durable qualities pair well together. You’ve accepted each other’s inevitable flaws. Even if your “perfect” partner drives you crazy now and then, you’re committed to building a deeper, substantive relationship over time.

I understand the frustration you might feel when comparing your own ideal portfolio performance to the appeal of whichever asset class happens to be on a tear. And, indeed, the S&P 500 has been on its longest-ever bull run lately.

But as Wall Street Journal personal finance columnist Jason Zweig recently observed, “U.S. stocks seem to have dominated over the long run only because they have done so extraordinarily well over the past few years. … The U.S. was among the worst-performing stock markets worldwide in the 1970s and the 2000s; it also earned lower returns than the average international market in the 1980s.”

Bottom line, remember why you first said “I do” to your personalized portfolio. It wasn’t just to chase after the hottest returns. It was to build durable wealth by maximizing expected returns while managing the related risks. That calls for a tailored balance between the stock and bond markets, as well as a globally diversified mix overall.

Making major tweaks to your portfolio might be instantly gratifying, but the love is unlikely to last.

OPEN PDF: Dimensional’s Quarterly Review, Q3, 2018


DimensionalSAGE Serendipity

Quartz.com has an interesting short video on the Turing Test. The test pits a human against the most advanced AI out there to see who is the human; AI has not passed the test so far. Author Brian Christian took the test and reflects that the year the machine wins is probably not that far off:

“… in a world of increasing communication via text and emoji (or even Google Smart Reply), human communication is becoming more bot-like, blurring the distinction between humans and machines. ‘We are meeting the machines in the middle,’ he concludes.” 

Sheri Iannetta Cupo, CFP®
[email protected]

SAGEbroadview Wealth Management is a Fee Only firm offering ongoing financial planning and portfolio management, with tax planning woven carefully throughout our services. We work virtually across the country, with offices in Farmington, CT, Morristown, NJ, and Burlington, MA.