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Quality Investment Advice: Greater Savings with Less Effort

Reflecting on 2022, one thing is clear - successful navigation required professional guidance. We’re happy to report our clients are in a significantly better position than the average retail investor who was down 39% vs. the average IIM portfolio being down 15%*. It is important to also note that many clients’ internal rate of return is even better because they are dollar cost averaging.

Here is why our client experience is different.

Value creation for clients: more than just stock picking

2022 saw the worst combined total return for both stocks and bonds dating back to 1872**. However, we created opportunity during uncertainty by customizing fundamental investing principals for clients. This adds incremental value to portfolios, which compounds to larger savings with less effort over time. Below are some statistics quantifying the value of implementing our principles:

  • Paid less taxes: our self-employed clients saved 30 to 50% on their tax bill through proactive tax planning and implementing tax advantaged investment vehicles

  • Bought investments cheaper: most clients make automatic periodic contributions, buying more shares when the market is down (they buy low)

  • Took on an appropriate level of risk: we implement custom, diversified risk-based allocations for clients, so they are in quality investments with time to recover

  • Generated positive relative returns: our portfolios outperformed their respective indices by an average of 3% after fees^

  • Saving towards goals: we helped clients open and contribute to over 100 accounts, each one earmarked to fulfill a unique life dream

Bottom line – it was impossible to time the market this year, not even the pros could do it (see this article). The thing that put clients in a better position was sticking to the fundamentals: financial and tax planning, dollar cost averaging, and appropriate asset allocation.

Now let’s put this year in perspective and look ahead.

Persist while others quit: the historical case for patience

When we hear that the S&P 500 has returned 10.1% annually since 1926, we could easily conclude that we can expect a 10% return in most y ears, but this is not the case. We will see returns on a scale from painful to exceptional. The following chart shows the annual returns of the S&P 500 grouped into six return ranges from the most painful (down over 20%) to the most exceptional (up over 20 %). When we look at the last 97 years - the graph is heavily weighted to the right - showing that recoveries are both longer and larger.

Bottom line – higher stock market returns do come with significant volatility but staying invested has been worthwhile for the disciplined investor.

Looking ahead: sticking to the fundamentals

Will 2023 investment outlooks turn into works of fiction, just as they did in 2022? Morgan Stanley says that “The consensus view is that early in 2023, earnings will collapse, bringing the stock market down with them. Sectoral leadership in the market suggests otherwise.”1 JP Morgan says that “Despite uncertainty on the horizon, significant valuation imbalances across markets mean there is more upside potential than downside risk in investing today.”2 Goldman Sachs says that “We expect this year to be less turbulent for markets, with inflation moderating and major central banks approaching the end of their tightening cycles. Yet there is still a fog of uncertainty facing investors. “

There seems to be consensus around uncertainty, so we will stick with the fundamentals and keep a long-term view. Our strategy for 2023 is to keep close contact with clients updating financial plans as situations change, adjust risk as time horizons change, and encourage consistent contributions into investment accounts. We will continue to follow what history tells us - that time in the market (within a strategic allocation) produces better results than timing the market.

Please let us know if you would like to schedule a meeting to check-in on your financial objectives and plan for the life you want to live, despite all the noise.

JUSTIN WOLLMAN INVESTMENT ADVISOR INTENT INVESTMENT MANAGEMENT 415-717-2661 *Source: Time Weighted Return from Reuters and Intent Investment Management **Source: MarketWatch ^Source: Intent Investment Management ^^Source: Intent Investment Management and Standard & Poors. Disclosure: S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks. The S&P index returns start in 1926 when the index was first composed of 90 companies. The name of the index at that time was the Composite Index or S&P 90. In 1957 the index expanded to include the 500 components we now have today. The returns include both price returns and re-invested dividends. 1-Morgan Stanley, 2023 Investment Outlook 2-JP Morgan, The year ahead investment outlook: A slow economy but better markets 3-Goldman Sachs, Outlook 2023 – Caution: Heavy Fog

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