For the over five decades that I have counseled individual investors like you, I have consistently advised the ruthless elimination of emotionalism from one’s financial affairs. Emotionalism is an investor’s meanest foe.

How do you eliminate emotionalism from your investment decisions? There are many facets to emotionalism, but as I wrote to my investment strategy report subscribers twenty years ago, one simple way to defeat emotionalism is to take a more hands-off approach.

Events of the moment should never be part of the investment mix. I price my portfolio once a year at tax season (because I must). Beyond this tax-related housekeeping chore, I pay little attention to prices. Most of what I own, I have owned for a long time. I know how things are going month to month and find it counterproductive to rustle through my holdings regularly. You’ll be amazed at how comfortable you can become with a hands-off approach. You sure as heck will pay a lot less in commissions and taxes. And you will defeat what is every investor’s meanest foe—emotionalism.

Some may scoff, but for many, the seemingly innocent act of tracking daily portfolio fluctuations can trigger the type of emotionally charged investment decisions that sabotage portfolio performance.

I have learned that through decades of in the trenches work with investors, but academic studies also show that the more often an investor reviews his holdings, the less likely he is to craft a return-maximizing portfolio.

A hands-off approach remains the mandate today.

Originally posted May 25, 2018.

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Last week I explained that I don’t miss the boat because I’m always in the boat. The post was an outline of my long-time philosophy for remaining fully invested so as not to miss the best times of market performance. My avoidance of market timing isn’t simply intuitive. In fact, in December 1991 I detailed some of the research on which I based that philosophy. I wrote:

Your Biggest Mistake in Investing Is to Market Time

You don’t want a fund that is an active trader. Market timing does not work; it’s a fool’s game. Forbes presented one version of the case well in its issue of 28 October 1991. The article explains a study done by professors Chandy and Reichenstein. The study examines monthly stock returns for the S&P 500 from 1926 through 1987. It found that “if the best 50 months­—only 6.7% of the total time period—were deleted, the S&P’s entire 62-year return disappeared.”

The Ibbotson studies covered market return from 1946-1990. They showed that $1 invested in stocks in 1946 grew to $130.52 in 1990. If, however, the 30 best months were taken out, $1 grew to $8.88 versus $8.43 for T-bills. Stocks barely beat T-bills over 44 years, without those critical 30 months.

Do you now see how terribly dangerous it is to be on the sidelines during the precious few really good months in the long, long stock market cycle? You, I know, intuitively believe that you can market time, or at least that Dick Young can for you. It ain’t so. The biggest mistakes I’ve personally made in the market have been being on the sidelines at the wrong time.

Selling out into cash is not the best action investors can take to prepare their portfolios for times of turbulence. Instead they should seek to develop a diversified portfolio that attempts to minimize and counterbalance risks in order to ride out volatility.

Market volatility is up, and any time that happens I get asked one question more frequently: “Is it time to sell it all and wait?” My answer is an emphatic no. Attempting to time the market by selling out and buying in is a great way to miss the best days and months of the market’s performance. Instead I recommended in May of 1991 that investors prepare ahead for market volatility by focusing on stocks with low betas. I wrote:

In the stock market the words risk and volatility are synonymous. I want you to concentrate most of your efforts on stocks that are less volatile than average.

What you need to know is a stock’s beta, or the measure of its volatility. A stock with a beta of 1.0 has characteristics of volatility that equal the average stock. A stock with a beta of 0.8 is only 80% as volatile as most stocks. A stock with a beta of 1.3 is 30% more volatile than most stocks.

You want to achieve your 20% goal with as little volatility as possible. You will sleep better with less volatility and you will be able to ride out market downturns fully invested with a large degree of comfort. You will be most comfortable with stocks that have betas of 1.0 and less.

Remember, over time the stock market advances in seven of every ten years. Over the years, my biggest failures have come from missing the boat or being under-invested during major market moves. When times were tough, I missed the boat because I was too hesitant to invest, and during recession I was under-invested. No more. Today, I never miss the boat because I am always in the boat, and I want you to remain in the boat along with me. It is simply a matter of ensuring how you are balanced in the boat so as not to be rocked out in rough water.

If you need help crafting a portfolio that minimizes risk and focuses on generating income, you can complete the form below. You will be contacted by a seasoned advisor from my family-run investment counsel firm, Richard C. Young & Co., Ltd. The advisor will perform a portfolio review—completely free and without obligation—explaining the programs being offered to help investors meet their goals.

Here’s what I told you, all the way back in February of 2015: stay fully invested. I wrote:

Stay Fully Invested

As I’ve written ad nauseam, I do not get in and out of the markets. I maintain my fixed income/equities balance, adjusting as time passes (fast) for my age. For an investor who is crafting a dividends/interest-oriented portfolio to pass along to heirs, I can live with a 75/25% equities/ fixed income mix. But where income and safety in retirement is the target, the reverse ratio is optimal—no second-guessing, no deviation from focus, and no market timing to be tolerated.

PPPP—Your Guide

I think a policy of PPPP will keep you and your family on a proper track. Here I am referring to my goal to Preserve and Protect via Perspective and Patience. If my PPPP immediately strikes you as a theme that makes you warm and fuzzy, I am excited for your future success. If instead such a seemingly boring approach leaves you cold, you still have my warmest regards, but also my great concern for your future success.

If your investment plan is strong, you shouldn’t be tempted to second-guess it, or deviate. A good plan will prepare you for the risks you’re willing to endure given your time horizon. If you need help crafting such a plan, request a free consultation with a member of the seasoned investing staff at my family-run investment counsel firm, Richard C. Young & Co., Ltd. by clicking here. Once contacted, you will be guided through a no-obligation review of your portfolio by an experienced professional. You too can build an investment plan that requires no second-guessing.

Throughout my years in the investment industry, the question most frequently asked by clients is probably “How are we doing?” In June 2015 I explained how I answer that question. I wrote:

How Are We Doing?

Throughout my first 28 years in the investment industry, I worked in the trenches, talking daily with clients and the financial media, as well as speaking at investment seminars around the world. All that changed in 1992, when I decided to move off the front lines and concentrate exclusively on research and writing, and Debbie and I moved to Key West, only 90 miles from Cuba. Hard to believe, but it has now been 23 years since I made that transition.

Concentrating on One Question

Taking stock as I set up to write this month, I decided to concentrate on one of the frequently asked questions from clients over the years. From my memory bank, the ranking #1 question was, how are we doing? Well, “we” most certainly did not include Dick Young, so in actuality what the client wanted to know was how he or she was doing. From day one, I had trouble with this often-asked question, because I was pretty certain the answer I would give would not feel right to me and, in the end, would not be especially helpful to my client. So I muddled along with mixed success.

Pre-Established Goals

Today, with the benefit of decades of hindsight, I have come to recognize that the clear winner would have been to simply decide with clients whether they were comfortable with the way we were meeting the pre-established goals we had worked out together. That meant no more comparing to one or more market indices or the efforts of other business associates. That sounds pretty simple in theory, but in actuality, a different picture emerges.

Buy High, Sell Low

The decided tendency of a vast majority of investors is to greatly understate sensitivity to risk. Most investors work off a “buy high, sell low,” emotionally charged template that is a bear to dismiss. The concept of patience is anathema to most. For many, action is the partner of success—when in fact history proves this not to be true. Sadly, the final nail in the coffin of goal construction is the total inability of most investors to embrace the two most important words in successful retirement account investing: compound interest.

OK then, a number of hurdles must be conquered before a suitable goal-oriented plan can be put in place. It is clear from my above menu that the subject of risk sensitivity must be addressed first, followed by some homework on portfolio activity, patience, and compound interest. Once satisfactory common ground is achieved, it is time to determine targeted returns.

The answer to the question “How are we doing?” is dependent on your performance relative to how you planned to do. Planning is the hardest part of investing. If you need help creating an investment plan for your portfolio, fill out the form below. You’ll be contacted by a seasoned professional from my family run investment counsel firm. They will guide you through a no obligation review of your portfolio, the first step in building an investment plan that is right for you. If you would like more information, visit www.younginvestments.com.

Making fewer, more focused decisions with your portfolio is a vastly superior strategy when compared to ill-considered rapid fire trading in and out of stocks. In July of 1997, I wrote about the benefits of a minimalist approach in life. The moral of the story being, the less you spin, the more you win. Here’s what I wrote then:

MONK!…

That’s it. Four letters say it all.

Thelonious Sphere Monk died on 17 February 1982, over 15 years ago. Still today, when the name Monk comes up in Jazz circles, no explanation is needed. From his early days in the San Juan Hill West 60s section of New York to Minton’s Playhouse in Harlem to Greenwich Village’s Village Vanguard, Monk’s unique approach to music and his eccentric approach to life have always engendered lively debate.

The just-released Monk/Straight, No Chaser CD (Columbia/Legacy CK64886) is a definitive Monk reissue, with 25 additional minutes of new music, including three titles restored to their original unedited length by reissue producer Orrin Keepnews, Monk’s long-term producer and the co-founder of Riverside Records. Included are two takes of Duke Ellington’s wonderful I Didn’t Know About You and, at last, the definitive and complete Straight, No Chaser. Listening to these classics as I was putting the finishing touches on the enclosed common stock Monster Master List, I was thinking how spare Monk was in the words he spoke and the notes he played. Even his name—Monk—fit the pattern.

Long-Term Profits Inversely Proportional to Trading Activity

The same approach Monk took to life and music suits us all in the investment process. Here’s what I mean. Your long-term investment success is certain to be inversely proportional to your trading activity. The less you spin, the more you will ultimately weave. Simply put, less is more.

Warren Buffett once said, “We [Buffett and Charlie Munger] continue to make more money when snoring than when active.” In Buffett’s Berkshire Hathaway portfolio, valued at over $27 billion, there are only eight primary holdings. Buffett is no spinner. Each holding is there for the long haul.

If you are looking for help with your investments, and you need guidance on a “less is more,” strategy, click here to sign up for the monthly client letter from my family run investment counsel firm, Richard C. Young & Co., Ltd. The letter is free, even for non-clients, and loaded with information on the strategies we are using to protect and nurture our clients’ portfolios.

Over my five-decade career in investing I have placed high value on on-the-ground intelligence gathered from real people. That’s why Debbie and I have spent so much time travelling in America and abroad, meeting business owners and retirees, and talking to everyone from VIPs to bus boys. Each has a story to tell and information to provide.

Along our way, Debbie and I have been to some of the world’s most interesting places. In November of 1995, I wrote to readers about our trip to the Biltmore Estate. Read my account here:

The Largest Private Residence in America

Biltmore Estate, located in bucolic Asheville, N.C., is not just a national treasure, it’s a terrific example of how to run a profit-making business at its highest efficiency. No government grants and subsidies here. Constructed between 1889 and 1895 by George Vanderbilt, grandson of shipping and railroad tycoon “Commodore” Cornelius Vanderbilt, Biltmore Estate, still privately owned and operated, is a stunning architectural achievement inextricably linked with The Gilded Age.

In the library, Vanderbilt’s scholarly interests are evidenced by 10,000 bound volumes covering history, art, architecture, landscape gardening, and classical literature in eight languages (all in which Vanderbilt was fluent). Adorning the library is a Pellegrini canvas ceiling painting, which graced the Pisani Palace in Venice during the 18^th century and is all the more important today since little of Pellegrini’s work escaped destruction during World War II.

Visitors from around the world flock annually to the unmatched estate tour. Allow a complete day to see it all. You do not want to miss the Estate Winery opened in 1985. It embodies Vanderbilt’s original concept of a self-supporting European estate and features the Estate’s own award-winning Chardonnay.

Biltmore Estate is the linchpin of what has fast become a favored retirement area for discerning Americans seeking a vibrant, moderate weather, four-season community.

Dick Young’s 10-Point Guide to High-Yielding Retirement Income

Put a trip to America’s largest private residence on your schedule. To assist you in funding your vacation or retirement shopping trip, I’ve assembled a strategic 10-point guide to high-yielding retirement investing (current or future). If you firmly follow this 10-point guide to maximizing income, you will greatly enhance your prospects for getaways to the great estates of the world, including an American classic like Vanderbilt’s Biltmore Estate.

When you invest for future or current retirement using conservative income-producing securities, your odds for success will improve immediately when you focus on item #1 and #2 in my 10-Point Guide to High Yielding Retirement Income.

Risk Analysis Always First

#1 It only makes good sense to recognize that when you work hard and save for a lifetime to retire in comfort, you do not want your life’s savings evaporating in some speculative venture. I can’t tell you how often I hear heartbreaking, first-hand stories from investors who have been virtually wiped out in some limited partnership scheme or other ill-advised sales-pitched nightmare.

In a recent book review, The Wall Street Journal commented on a big brokerage firm’s disaster with limited partnerships. “(XYZ) went for the whole enchilada when it adopted a policy of defrauding its customers. The firm sold $8 billion in limited partnerships spread over 701 entities to more than 600,000 investors. Only a handful of those investments ever performed as promised. (XYZ) continued to pressure its brokers to push new deals long after it knew that many of the previously sold ones were all but worthless.”

What do you think of that sorry mess? Stunning, isn’t it? Thousands of investors took the pipe. And I’d bet big bucks that the vast majority did not bother to read carefully the prospectus for those deals nor ponder the element of risk before committing hard-worked-for lifetime savings.

Always remember, when you lose 50% (not to mention all your money) on an investment, you have to make 100% next time out just to get even. And at that, you have made a zero return on your investment over perhaps an extended period of time. The math is bad, real bad. In my three decades as a professional investor, I’ve found that there are surprisingly few opportunities to actually double your money on any single investment.

Counting on a double-your-money bailout is long odds at best. So first and foremost, make sure you understand the risks of any investment before you invest. Do your prospectus homework well, and ask questions—plenty of questions.

If you want to spend your retirement travelling to the world’s finest places, you can’t go frittering away your hard-earned savings by taking risks you don’t understand. Avoiding risk and focusing on the creation of a steady stream of income you can live on during retirement is the course I recommend to all investors. It’s hard to make money in investing, but it’s even harder to make back what you’ve lost.

Around four years ago I was practicing French with Debbie before a trip to Paris. I wrote then:

Je Me Sens Bien

As you read this month’s strategy report, Debbie and I will be in Paris. Practicing her French yesterday, Debbie asked me if I knew the meaning of je me sens bien, with James Brown as a clue. Well, not knowing for certain, I guessed, “I feel good,” a great James Brown lyric. Debbie was astounded that I got the quiz, as was I, because I really had no idea. So what gives? The answer lies in association. The rhythm of the four words simply brought the James Brown lyric to mind, literally out of the blue. These things can happen with association. It’s a mindset thing that isn’t always easy to explain. In recent days, given the extraordinary volatility in the financial markets, mindset and association are an especially vital concept for investors. When you are in the right place mentally, you can have no problem weathering volatility. If not, well…

Successful Investing Is a Mindset

As you know, I do not check the prices of my investments daily, weekly, or even monthly. I do an annual checkup only at tax time. When I make a significant investment, I have no intention of liquidation anytime soon. I am in for the long haul. Thus, short- or even medium-term volatility is of zero concern to me, beyond keeping an eye out for a name on my watch list that may have taken a temporary beating due to no particular fault of its own. So, then, successful investing is a mindset based upon a master plan that allows an investor to find comfort through thick or thin.

Since then, I have traveled to Paris many times, and I am in the city now, amidst the sad reaction to the burning of Notre Dame cathedral. People in Paris are not exactly feeling good. But there is hope. Much of the cathedral is still standing, and a city as old as Paris has endured tragedies of this kind before.

Revolutions, occupations, crippling riots and terrorist attacks have befallen Paris, but the city’s people have a way of focusing on the long-term. Quality, durability, and timelessness describe the aesthetic that has made Paris the center of the cultural world.

The lesson of Paris’s success is to focus on the long-term. Weave that principle into your investment portfolio, as well as your life in general. Avoid risk, compound your portfolio, and don’t let emotion guide your actions. Steadfastly adhering to such a plan will make you feel good.

In July 2007 there was a sense of unease in the markets and I was warning investors to prepare themselves with a low draw on their portfolios. I also gave investors two ways to help prevent outliving their money. Read here:

At the start, retired investors and investors saving seriously for retirement (76 million boomers will begin retiring next summer) must answer two basic questions: (1) What is the proper mix of stocks and bonds? (2) How much money can be drawn annually from an investment portfolio? I have used Ibbotson data and examined 20-year rolling time periods from 1926 on. I have concentrated on minimum returns in order to advise a portfolio mix most likely to assure a draw of my advised 4%. The highest minimum return over 20-year rolling periods was achieved with a portfolio mix of 50/50 bonds and stocks. That minimum return was 4.6%. I would treat a 50% fixed-income portfolio component as suitable. And there is no way I’d go over 4% (inflation adjusted) for my annual draw. In fact, if possible, investors of suitable means are advised to cut back to a 3.5% draw (of an initial portfolio). Of course, the two best ways to make sure that you and your spouse do not outlive your money are to (1) work longer, and (2) slash your annual living expenses.

If you are still working, there is a third way to stretch your retirement portfolio, save more. Saving more today and compounding it for later is the key to a happy retirement. Prudent investors may also consider a 3% draw today.