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Other Comprehensive Basis of Accounting Fundamentals | 4152308D

July 1, 2015
Sacramento Area

Providing Perspective

By Alex Brown

As many know, I work in the securities industry. It’s been a wonderful experience using my public accounting and corporate finance background to serve my investment management clients today. A principle we constantly teach our clients that has endured the test of time is to “not react emotionally to your money.” This last political cycle (unconventional to say the least) heightened the emotional gauge quite a bit and has continued to rattle the spirits of many. I receive calls regularly from clients extremely concerned that this new administration will lead the markets and economy into the Great Abyss, while other clients call me with extreme optimism that this change of the guards (albeit controversial) is refreshing and will generate great economic growth. Both are consuming much of the same information, yet interpreting it very differently.

We often find ourselves acting more like emotional coaches than we do as financial advisors. DALBAR does an annual study that measures the annual return of the average investor as compare to different asset classes. For the 20-year period ending Dec. 31, 2015, the average investor received an annual return of 2.1 percent, while the S&P 500, which is a measure of U.S. stocks, returned 8.2 percent. This large difference is the product of emotional investing. I share this with you because, in general, any type of emotional decision making generally doesn’t produce great outcomes and, in my industry, it’s more apparent because we can back it up with numbers.

It’s our responsibility to put perspective and appropriate context to the world of information that inundates the lives of our clients on a regularly basis. As we continue to grow our business and find better ways to serve our clients, let us all be the financial advisers on a solid footing that will help navigate our clients through the challenging world that lies ahead of us.

Make it a great February!