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Blue Harbinger Weekly: Pitfalls to Avoid, Opportunities to Keep Winning

This past week was a roller coaster complete with jostling ups and downs, but we finished very close to where we started (the S&P 500 finished the week down 0.4% after being down as much as 3.0%). Did you panic over the volatility and make bad decisions that cost you money? Did you lose sight of your long-term goals? This week’s Weekly reviews some our holdings, as well as pitfalls to avoid and opportunities to keep winning.


For example, here is a look at an attempt at a fear inducing headline from Wednesday…


The gold bugs always come out when the market gets volatile, and this past week was no different especially considering concerns over the fed’s monetary policy and the ongoing “trade war” with China. The theory on gold is that it cannot be manipulated like government controlled currencies, and therefore it must be safe. In reality, gold is volatile and unpredictable. It may be some sort of hedge on inflation over hundreds of years, but in a normal adult investing lifespan, gold is pretty volatile, unpredictable, and not a good inflation hedge, as you can see in this next chart…


And while gold bug panic was one potential way to get you to take your eye off the ball and ditch your long-term strategy (in our opinion), another constant risk is Wall Street brokers trying to get their hands on your nest egg. Here are two examples…

  • The flow of money away from expensive active management and into passive funds has some benefits; mainly investors do better with passive instead of active because active fees detract too much from your total returns over the long-term. And also because active managers are very conflicted by often being forced to sell proprietary products, or invest in a certain way by their management, or by being too short-term focused, to name a few. This is exactly why we believe, if you are inclined, managing all or part of your own nest egg is a better strategy.

  • According to this article, brokers make more on your cash than you do. However, in theory, so does the entire banking system. Beware of what you buy and/or invest in. Caveat Emptor!


Despite last week’s volatility, we had some winners among our current holdings and on our watchlist, as you can see in the following table…


Of course their were losers on the list too…


Most of the big moves were related to earnings announcements this past week, which is par for the course. We continue to be comfortable with our current long-term holdings, but worth mentioning… weekly big percentage moves can be another costly source of mistakes for investors. Specifically, these types of moves are normal, however panicked investors often sell our of fear and/or buy to chase recent returns—these are both usually the exact wrong thing to do. We invest in a portfolio of high quality stocks, and on average they continue to do very well over the long-term.

Important Takeaways…

Last week was volatile as investors are fearful about what negative things could happen as a result of the fed’s monetary policy and the ongoing “trade war” with China. However, far more important than losing sleep over the daily news flow are two things. One, stick to your long-term investment strategy. Specifically, if you cannot handle the volatility risk, then don’t put 100% of your nest egg in aggressive growth stocks (such as the pure growth “PG” stocks in our Income Via Growth portfolio) because they’re not for you—they don’t fit your goals. Rather, invest in less volatile (lower beta) high income securities such as those in our Income Equity portfolio or our Alternative Fixed Income portfolio. Which brings us to point number two… pick good investments. This is exactly what we are trying to help you with by identifying the individual securities in our portfolio and that we write about. Throughout history, diversified, long-term, goal-oriented investing has been a winning strategy. Avoid the common pitfalls, and you’ll keep winning with your investments.

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