Happy New Year.
As we look back on 2017, we are mostly pleased with the absolute returns that our mutual funds generated. We believe that the performance of the past 5 – 7 years has been in line with what is needed to allow our clients to reach their goals.
As we look forward to 2018, we remain concerned about the valuation of the overall market. When stock prices are higher than normal, as they are now, a historical analysis suggests it is logical to expect lower returns going forward. A strategy of buying stocks irrespective of price at this level may therefore jeopardize one’s financial plan if one is counting on the recent past to continue. The alternative approach of buying stocks only when they become attractive greatly increases the odds of success as we see it, but it requires discipline to implement.
We are currently witnessing a contagion of FOMO – fear of missing out. What began with a fear of missing out on gains in the overall stock market has now reached fever pitch in the realm of cryptocurrencies. It seems that many are “investing” (be it stocks or Bitcoin) without knowing what they are actually getting. Discipline is needed to disregard the surrounding mania and stick to a consistent process for the long-term.
All of our efforts at NorthWest Financial are focused on helping you achieve your goals by implementing a carefully considered financial plan with a strict investment discipline. Please give us a call to discuss your particular situation.
Aaron Pettersen, CFA, CFP®