Buy or Sell on the Russian Invasion (a chart you won’t believe)?
If you didn’t sign up to watch Joe Maas’s 2022 stock market outlook webinar, you should. I think it will be comforting for those who watch it. To sign up, click on the following link: https://pomplanning.net/2022-market-outlook
What does this very interesting chart say? Wars are not bad for the stock market!
With every war listed above, the market went positive in the months following the start of the war. In the Afghanistan war, there were still several positive months before the downturn and that was the 2000 crash that really wasn’t connected to the war.
This is a chart you can give to clients who you think are freaking out due to the effects of the war on their portfolio over the next 3-6-9 months.
Best Investment Practices
The Russian invasion is my excuse to talk about best practices when it comes to managing a client’s money in the stock market. There are really only a few ways to go about it:
1) Asset allocation/buy/hold
2) “Active” money management
What’s the problem with asset allocation/buy/hold? As the DALBAR Study illustrates every year, investors do NOT buy and hold. They panic sell and then buy back in at the wrong time.
What’s the problem with “active” money management? Most underperform (sometimes by a lot) in up markets (mitigating risk is great but you still need good returns).
Multi-Manager Tactical Portfolios
At POM Planning (the RIA I co-founded), we believe the best investment practices come from using multiple high quality tactical managers in our portfolios (3-6 managers). We don’t asset allocate by class, we asset allocate by tactical manager. This process is overseen by our CIO and favorite industry rock star Joe Maas, CFA, CFP®, ChFC, CLU®, MSFS, CVA, ABAR, CM&AA, CCIM.
Also, I agree that most tactical managers are not very good, when you get access to as many as I have seen/access to, and it’s not difficult to find the cream of the crop (most not well known).
CALMAR Ratio—few advisors know what this is. It’s my absolute FAVORITE investment metric.
CALMAR is a simple risk-adjusted return metric. For the return generated and the risk taken, a number is assigned. Above 1.0 is good, above 1.5 is great, below 1.0 is not ideal, and below 0.5 is not good.
Let’s compare CALMAR ratios for the SPY and a 60/40 blend to the POM Multi-Manager portfolios (January 2016 to December 2021). I’ll also compare the net CAGR and Max Drawdown.
Hmm…lower drawdown and better returns. Who would want that? Clients!
Learn More about POM WM and/or the Managers We Use
If you want to learn more about POM WM as an RIA to work with or if you are simply interested in learning more about and how to get access to the tactical managers we use, click on the following: