Investing in the stock market can be a rollercoaster ride of emotions. With market fluctuations and the constant bombardment of media opinions, it’s easy to get swayed by the heat of the moment. However, the key to successful investing lies not in the impulsive decisions prompted by our instinctual ‘lizard brain’ but in a disciplined, science-based approach.
The Pitfalls of Market Timing
History has a habit of repeating itself, especially in the financial world. Many investors attempt to “time the market” or predict its movements to maximize returns. However, this strategy often proves futile. Studies and historical data suggest that even the most seasoned investors find it challenging to outperform the market consistently.
The so-called “monkey throwing darts” analogy illustrates that random stock selections can and often do outperform expert choices, largely due to luck rather than skill. This serves as a sobering reminder that the collective knowledge of the market often surpasses that of any individual investor.
The Science of Investing
Modern investment strategies are deeply rooted in scientific principles and research. The Capital Asset Pricing Model (CAPM) and the Efficient Market Hypothesis (EMH) are foundational theories that have shaped our understanding of risk and efficiency in the markets. CAPM is utilized to calculate expected returns based on an investment’s risk level, while EMH posits that markets are efficient and reflect all available information.
Meanwhile, Louis Bachelier’s and Burton Malkiel’s random walk hypothesis suggests that stock prices fluctuate unpredictably, defying precise forecasting. Complementing this, Eugene Fama and Kenneth French’s three-factor model provides a framework for evaluating stocks based on three key factors: market risk, company size, and book-to-market value. Together, these theories have reshaped investment strategies by demonstrating the role of random chance and specific market factors that can significantly influence a stock’s expected returns, thereby aiding investors in making more calculated and informed decisions.
The field of behavioral economics has also significantly influenced investment strategies. Vernon Smith’s research in experimental economics revealed that people often do not behave as predictably as traditional economic models would suggest. This was further expanded by Daniel Kahneman and Amos Tversky, who explored the psychological biases and heuristics that affect financial decisions. Their findings have profound implications, highlighting the importance of recognizing and mitigating these biases in investment strategies.
Historical Financial Bubbles and Crises
Reflecting on historical financial bubbles, such as the Tulip Bubble and the South Sea Bubble, provides invaluable lessons on the risks associated with speculative investments. The Wall Street Crash of 1929 and subsequent events like the Dot-Com Bubble and the Global Financial Crisis of 2007-2009 underscore the complexity of market systems and the dangers of irrational exuberance.
The COVID-19 Crash of 2020, while still fresh in memory, serves as a recent example of the unpredictability of markets and the influence of global interconnectedness on market volatility. These events remind us of the importance of diversification and the need for a well-thought-out investment plan to navigate through uncertain times.
Investment Plan Strategy
An effective investment strategy requires crafting a thoughtful plan, guided by expert advisors attuned to your financial goals across varying time frames. It involves diversifying assets to balance risk and align with short-, mid-, and long-term aspirations.
Constantly monitoring the portfolio can trigger hasty, emotion-driven choices. For this reason, periodic reviews are recommended to maintain focus on broader financial targets without being swayed by market volatility. This disciplined approach prioritizes strategic adjustments over impulsive reactions, anchoring your investment journey toward its long-term destination.
The Importance of Asset Allocation
Asset allocation has historically determined the bulk of investment returns. A well-diversified portfolio tailored to individual risk tolerance and investment horizons is crucial. Implementing factor-based investments can also help capture returns, and using ETFs or mutual funds evaluated to encapsulate these factors can be beneficial.
A systematic approach to rebalancing ensures that an investor’s asset allocation remains aligned with their risk profile and investment goals. This process should not be swayed by the market’s short-term ups and downs but should follow a pre-established plan.
Educated Investing Over Speculation
In the face of complex market dynamics, the mantra “follow the science” becomes more than just a phrase; it’s the bedrock of rational investing. It suggests an investment approach grounded in empirical evidence and proven financial principles. By doing so, investors can mitigate the influence of their inherent biases and the noise of market pundits.
For those seeking to expand their investment knowledge, turning away from the sensationalism of media predictions and toward educational resources is advised. Books and materials that delve into the intricacies of market behavior and investment strategy can provide a more solid foundation for making informed decisions.
Use the Science to Your Advantage
Investing is not about predicting the future or outsmarting the market. It’s about strategic planning, understanding the science of finance, and maintaining discipline in the face of uncertainty. By following these principles, investors can work toward achieving “Wealth on Purpose,” focusing on long-term growth and stability rather than short-term gains influenced by market speculation and emotional reactions.
If you have any questions or want to know how to get your hands on a copy of “Wealth on Purpose” by Bryan Ballentine, give us a call!
Have a great weekend!
Sources: “Wealth on Purpose” by Bryan Ballentine
Golf Tip of the Week
You’ll Escape The Trees More Often With This Effective Strategy
As pretty as trees on a golf course can be to look at, they become a lot less appealing when they’re planted between you and the flag. In this scenario, Golf Digest Best Young Teacher Molly Braid is 60 yards out, off the fairway, behind a tree. Especially when you’re so close to the green, the temptation is to take a wedge and try to go over the tree. But if you’re like a lot of players, you’ve ended up in the tree more often than you’ve successfully made it over.
Instead of trying to hit a soaring wedge in these situations, Braid says to grab a much less lofted club and go under the trouble.
“Grab a seven iron and hit a big chip shot,” Braid said. “Get your feet closer together, lean towards the target, sternum slightly ahead of the ball. Let the handle lean towards the target as well. From there, we’re going to keep the club low, around hip high to hip high. We’re going to punch the ball out and let it roll up to the green.”
Hitting the high shot over the trees that lands softly on the green is the more exciting option, we get that. But if you want to hit the shot that’s going to put you in the best positon to save par from the trees, you’ll want to hit Braid’s punch 7 iron.
Tip adapted from golfdigest.comi
Recipe of the Week
Football Cheese Ball and Charcuterie Board
10-12 Servings
Ingredients
Cheese Ball
- 6 ounces pecan pieces, chopped
- 12 slices bacon
- 1 1/2 pounds cream cheese, at room temperature
- 6 ounces mild yellow Cheddar, shredded (about 1 1/2 cups)
- 6 ounces smoked Gouda, shredded (about 1 1/2 cups)
- 1 tablespoon Worcestershire sauce
- 2 teaspoons hot sauce
- 1 teaspoon ground cumin
- 4 scallions, finely chopped
- 1 piece mozzarella string cheese
Board
- 1 1/2 pounds thin-sliced charcuterie, such as salami, sweet or hot soppressata, sandwich-size pepperoni, etc.
- Assorted cut green vegetables and fruits, such as grapes, Granny Smith apples, broccoli, snow peas, green bell peppers and cucumbers, for serving
- Square and round snack crackers, for serving
- Prepared ranch dressing, for serving
- Prepared blue cheese dressing, for serving
Instructions
- For the cheese ball: Preheat the oven to 350 degrees F.
- Spread the pecans on a baking sheet and bake until lightly toasted, 5 to 6 minutes. Set aside to cool.
- Cook the bacon, in batches if needed, in a large skillet over medium-high heat until crisp, about 6 minutes. Drain on paper towels. Chop the bacon.
- Combine the cream cheese, Cheddar, smoked Gouda, Worcestershire, hot sauce and cumin in a food processor, Process, scraping down the work bowl once halfway through, until smooth. Add the scallions, 1/2 cup of the chopped pecans and 1/2 cup of the chopped bacon. Pulse to evenly distribute.
- Combine the remaining bacon and pecans in a medium bowl and toss well.
- Form the cream cheese mixture into a football shape in the middle of a large serving board. Pat the pecan bacon mixture evenly over the tops and sides so it adheres. Brush away any excess. Pull the string cheese into pieces and cut to make the laces of the football. Chill the cheese ball until firm, about 2 hours.
- For the board: To assemble, fold the charcuterie in quarters and shingle them to make a standing rim around the edge of the board. Set 4 shot glass-size cups where goal posts would be in a stadium. Fill in the space around the cheese ball with the vegetables and fruit. Lay a row of each cracker just inside the charcuterie border to resemble little “seats” in your stadium. Pour ranch and blue cheese dressing into the shot cups for dipping.
- Special equipment: a large wooden cutting board; 4 shot-glass size cups
Recipe adapted from Foodnetwork.comii
Travel Tip of the Week
12 Affordable Vacations for Couples on a Budget
From the U.S. to Mexico, these getaways come at a price you’ll both love.
Sharing experiences as a couple can make travel more enjoyable, whether it’s your first trip together, a honeymoon, or a babymoon. Sometimes, however, the motivation is there, but the budget doesn’t allow for a lavish getaway.
With some strategic planning and calculations, it’s possible to create an affordable vacation. You might look for off-season or less popular destinations, or choose cities known for great free attractions. Shop for the best airfares on sites like Hopper or Skyscanner. It also pays to be flexible on timing or travel days.
Travel experts advise putting together a budget and itinerary to estimate costs for hotels, activities, transportation, food, and other purchases. They also suggest booking a hotel with a kitchen, so you can prepare some of your own meals instead of dining out. Consider all-inclusive hotels, too, but only after evaluating what is actually included and how much you would take advantage of the amenities.
Recognizing that “affordability” is a relative term, we’ve aimed for places in North America where couples can have an enjoyable vacation while staying within the budget they create for themselves. We looked for free or low-cost activities and took into account the availability of less costly lodging. With that in mind, here are some of the most affordable vacations for couples.
Mazatlán, Mexico
Mazatlán offers golden beaches, delicious restaurants, vibrant nightlife, history, a 13-mile seaside promenade, reasonable prices, and lots to do at little or no cost. In the downtown historic district, couples can explore the romantic old square of Plaza Machado, stroll along cobblestone streets, and stop for a drink or ice cream. You could spend an entire day along the Malecón de Mazatlán, browsing souvenir stands, watching cliff divers, or grabbing a snack from one of the vendors. Rooms at the all-inclusive Pueblo Bonito Mazatlán Beach Resort start at less than $200 a night. Plus, guests can access the restaurants and amenities at the upscale Pueblo Bonito Emerald Bay Resort & Spa, including a 16,500-square-foot wellness facility with hydrotherapy pools, steam rooms, spa treatments (available at an additional cost), and fitness classes.
New York City
You might be surprised to find New York City on a list of affordable vacations, but once you get to the Big Apple, there’s so much to do without spending a dime. While the city has begun cracking down on Airbnbs, you can still find vacation rentals and hotels for around $200 a night. Meals out don’t have to be expensive, either. Enjoy an iconic (and affordable) New York bagel breakfast, grab a slice of pizza, or try a hot dog from one of the street stands. Many of NYC’s museums are free or accept a donation for visiting. Couples can also take the subway to Long Island City’s Gantry Plaza State Park, which offers gorgeous views of the NYC skyline, or ride the Roosevelt Island Tramway (about $3 each way) for an aerial view of the city.
Honolulu, Hawaii
If you have your heart set on a vacation in Hawaii, you can manage to arrange one within a limited budget, especially with the help of some airline miles or points. Spending time on the beach and hiking are among the free things to do in Honolulu, as is touring the Pearl Harbor National Memorial and the USS Arizona Memorial. Oahu’s bus system is an inexpensive and efficient way to explore the island beyond the state capital. Food is a fun part of travel, so look for farmers markets and sample saimin (noodle soup), poke, and shave ice at local spots. Rooms at The Twin Fin, a surf-inspired beachfront hotel, start at $199, and nightly entertainment includes DJs, live music, stargazing, and more.
Coeur d’Alene, Idaho
Located in northwest Idaho, on the northern shore of Lake Coeur d’Alene, this year-round destination is ideal for couples who love the outdoors. Hiking, biking, boating, and visiting wineries and breweries are among the top things to do, in addition to enjoying the gorgeous scenery. Explore the downtown area near the waterfront, browse the boutiques, and stop for a bite at one of the restaurants. Places to stay include hotels, bed-and-breakfasts, and campgrounds. The Coeur d’Alene Resort, known for daily scenic cruises plus sunset and dinner sailings, offers rooms starting at around $199.
Gulf Shores, Alabama
Sandy shores, warm Gulf of Mexico waters, great food, and lively nightlife make the Gulf Shores and Orange Beach area an economical romantic getaway. Take a ride on the Ferris wheel or head to The Track Family Fun Park to drive a go-kart, ride a roller coaster, and play some mini golf. You can hop on the Mobile Bay Ferry for less than $10 to enjoy the scenic bay. Choose from more than 200 restaurants, and try the local seafood that includes shrimp, oysters, crab, and snapper. Hotels, resorts, bed-and-breakfasts, and campsites offer many affordable lodging options.
Fort Worth, Texas
Around a half-hour drive from Dallas/Fort Worth International Airport, Fort Worth is a fast-growing city known for its Western culture and cowboy legacy, now preserved in the Stockyards National Historic District. Explore the streets that once were home to the cattle trade, and learn about the area’s past with a walking tour. Don’t miss the cattle drive when the Fort Worth Herd of longhorns passes by with drovers who are available to answer questions. Shops, saloons, restaurants, rodeo events at Cowtown Coliseum, and music and dancing at famed Billy Bob’s Texas provide plenty to see and do. Stay at the Kimpton Harper Hotel for under $200 a night, and check out the upscale Hotel Drover, Autograph Collection on Mule Alley for a beverage in the outdoor Backyard lounge.
San Juan, Puerto Rico
If beautiful beaches, great food, and history are what you’re after, consider visiting Puerto Rico — no passport needed. Instead of an expensive resort, look into locally owned boutique hotels or glamping sites. Taxis and Uber are available to get you around the San Juan area, so you don’t have to spend on a rental car.
In Old San Juan, you can visit 16th-century fortresses, watch street performers along the Paseo de la Princesa promenade, and go salsa dancing at cocktail bars like La Factoría. Visit museums with low admission fees like Museo de Las Americas, or head to the nearby Santurce neighborhood to see dazzling street art for free. Less than an hour’s drive from the city, El Yunque National Forest is the only tropical rain forest in the U.S. National Forest System. Hike to a waterfall and enjoy a picnic lunch in the beautiful surroundings.
Palm Springs, California
The desert of Greater Palm Springs is a year-round destination, though hot summers often have visitors heading for pools or air-conditioned venues. No problem, there are plenty of both, plus other things to do without spending a lot. Visit art galleries along Palm Canyon Drive in the city of Palm Springs, take a self-guided tour of the midcentury architecture or celebrity homes, and hike past rock formations and palm trees on the trails in Indian Canyons. The Palm Springs area has many budget-friendly hotels and vacation rentals. About an hour’s drive away, Joshua Tree National Park features stunning rock formations, native vegetation, cacti, and romantic stargazing opportunities.
St. Petersburg and Clearwater, Florida
Known for its white-sand beaches and warm waters, this area is a great choice for an affordable vacation, especially if the goal is sunshine, swimming, and water sports. There’s plenty to experience after sunset as well, from restaurants to clubs to dive bars. Stroll around town to view the more than 600 murals or join a street art tour. The Dalí Museum is set in a unique building on the downtown St. Petersburg waterfront and offers discounted tickets on Thursdays after 5 p.m. And with a variety of places to stay, including B&Bs, the area has lodging options for almost any budget.
Washington, D.C.
The nation’s capital, with its many free monuments and museums, can be an affordable destination. The Smithsonian museums are free to visit, and there’s something for every couple’s interest, from space travel and technology to art and natural history. Just remember to apply for timed entry passes (required for the National Air and Space Museum and the National Museum of African American History and Culture) in advance. Touring the White House is also free, but you’ll need to request a reservation at least 21 days in advance. The public transit system, including its easy-to-navigate Metro, offers a convenient, low-cost way to get around. For an affordable meal, head to a fast-casual spot like chef José Andrés’ vegetarian restaurant Beefsteak or try the famous chili half-smoke at historic chain Ben’s Chili Bowl. Hotels in the capital might be pricey, but staying in nearby Alexandria, Virginia, can save you some money and allow you to explore another charming city.
Toronto, Canada
This pedestrian-friendly city is known for its diversity, reflected in its vibrant culture and food scene. Stroll down the cobblestone streets of the Distillery District, which features art galleries, restaurants, and boutiques housed in restored industrial buildings, grab a bite to eat at St. Lawrence Market, or check out Stackt, a shipping container market with pop-up shops, a microbrewery, and special events. Take advantage of the extensive public transportation network or get around on two wheels with Bike Share. You can easily find a hotel room for less than $200 a night, especially if you visit outside of the busy summer season.
Yosemite National Park, California
Home to granite cliffs, waterfalls, giant sequoias, and incredible wildlife, Yosemite is one of the most beautiful national parks in the U.S. The budget-friendly vacation destination is a paradise for hikers and photographers, and many trails stay open in the winter. Save on dining and enjoy picnic lunches with views of Yosemite’s wonders. Affordable lodging ranges from camping to cabins, either inside the park or nearby. Even if you don’t stay at the classic Ahwahnee hotel, be sure to stop in to see the decor, art, and architecture of this historic property.
Tip adapted from travelandleisure.comiii
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i https://www.golfdigest.com/story/hitting-under-trees-golf-approach-shot-tips
ii https://www.foodnetwork.com/recipes/food-network-kitchen/football-cheese-ball-and-charcuterie-board-13530099
iii https://www.travelandleisure.com/cheap-vacations-for-couples-7095038
