Quick Hits…What I’m Reading (Summer Reading List – What did I actually read?)

• Principals for Dealing with the Changing World Order: Why Nations Succeed and Fail – Ray Dalio…This was first on the list but didn’t get to it.  It is up next.

• Nicomachean Ethics – Aristotle…nope to this one too…next after Principals.

• Bittersweet: How Sorry and Longing Make Us Whole – Susan Cain….this was a good one.  It really had me deep in thought for a while.  I like the thought that bittersweet, or the combo of bitter and sweet, is actually an impetus towards connection with others and a gateway to truth, beauty and goodness.  I highly recommend.

• Quiet: The Power of Introverts in a World That Can’t Stop Talking –  Susan Cain…I liked Susan Cain’s writing so much, I continued on with her next one.  Power to my Introverts!

• Paul: A Biography – N.T. Wright…this was a bit of a textbook-type read at times so it took me awhile, but really illuminated the apostle Paul’s life in his first century context in a new way. 

• The Impossible First: From Fire to Ice – Crossing Antarctica Alone – Colin O’Brady…ok, this is amazing.  I’m not sure how I hadn’t heard about this before now as Colin attempted this trek back in 2018.   I love stories of rejecting limits, overcoming unbelievable obstacles, and discovering what truly matters most.  Such a cool story!

• The 12 Hour Walk – Colin O’Brady…Because I am now a Colin O’Brady fan, I had to read his latest book.  It actually just came out this week, and is a little more self-helpy at times than I normally like, but the idea of a solitude walk for any of us to push past our limiting beliefs is a really interesting idea.  There are a ton of stories of his different adventures over the years injected throughout the book that are definitely inspirational and worth reading.

Should you consider market timing in today’s world?

If you have known me for any length of time, this title may be a bit of a surprise.  But keeping an open mindset is always a good idea, so it is at least worth considering from time to time.  So let’s consider…As tough as the first six months of the year were for most stock markets, July seems to have been the antithesis while the three broad U.S. stock indexes ended July 2022 with their best returns since 2020—up 9.1%, 6.7%, and a hefty 12% for the S&P 500, the DJIA, and the Nasdaq Composite, respectively. While this is a nice short term turn around, it also is not unprecedented.  In fact, two times the S&P 500 Index performed even worse (in the first halves of 1962 and 1970), it happened to rebound gloriously in the second halves of those same years.

Market Pricing: Compared to What?

Why the dramatic turnabout this July, even as national and global headlines remain relatively bleak? Efficient market theory would suggest, it’s not whether the news is good or bad, but whether it’s better or worse than what we’ve been collectively bracing for. Of course, even as the financial press announced the strong monthly returns, there have been plenty of pundits pointing out how fleeting any “recovery” might be. After all, most of the same challenges we’ve been facing all year remain alive and unwell, which makes it easy for forecasters to convincingly call for copious doom and gloom ahead. They may even be correct. But once again, we caution against betting on it either way.

What Does the Data Say?

Plus, think about it this way: If expert forecasts were useful, we should see evidence that trading on them can improve your end returns. Instead, a recent analysis by Morningstar’s John Rekenthaler reinforces existing data suggesting just the opposite is true.

Rekenthaler compared returns across five asset allocation fund categories for the 10 years ending December 2021. Four of the five fund categories were strategic stock/bond funds with a static equity exposure of between 15% to 85%. So, for example, funds with 85% equity exposure kept their 85% exposure across the entire decade, and so on.

The fifth fund category was for tactical asset allocation funds with the freedom to shape-shift their equity exposure in response to market news. In other words, “tactical investing” is a fancy name for market-timing.

If anyone could stage a successful market-timing campaign, it should be professional fund managers and their legions of high-end market analysts. Instead, for the decade ending 2021, the tactical fund category did outperform asset allocation funds that were mostly invested in fixed income (with lower-expected returns). But they significantly underperformed fund categories mostly invested in equities.

Tactical funds also had a nasty habit of disappearing entirely, which probably prevented their worst returns from even showing up in the results (even though real people lost real money in them). Survivorship rates among strategic funds were between 66%–74%, whereas the tactical funds only survived about 53% of the time.

Rekenthaler also looked at whether investors could have done well by identifying the few “winning” tactical funds ahead of time. He demonstrated that the funds’ relative rankings were so random from one year to the next, there was no way to do that. If anything, past outperformance suggested slightly worse returns moving forward.

Stranger Things

So, are we predicting a happily-ever-after for 2022? Hardly. Then again, you never know; stranger things have happened.

Instead, because we don’t know, we diversify. And we wait. Since markets have been rewarding evidence-based investors through the decades for this level of patience, we intend to continue doing the same. Let us know if we can help you manage an investment portfolio ideally structured to sustain you, your family, and your wealth through the perpetual uncertainty that lies ahead.

Could Extending Your Vacation Expand your ROL?

Have you had days during your working career when just carving out a free weekend for a vacation felt impossible?  If you’re retired, time is no longer an issue! Or perhaps you are at a stage in your career where you have more freedom with your time.  Maybe that means that you have some more freedom around where you travel, when, and for as long. For some, this could look like an extended vacations that allows them to immerse themselves in a new place and enjoy their leisure time with some actual leisure.

Here are some reasons you might consider adding an extra week or two to your next vacation.

Audition vacation spots for something more permanent.

Is your annual three-day trip to Florida or the ski trip to Montana the highlight of your year? Maybe your favorite vacation spot would be a good place to relocate in retirement. Extending your vacation could help you move beyond your usual travel radius and try new restaurants, beaches, and other attractions. Instead of staying at your usual resort, house sit for a friend or rent an Airbnb so that you can live like a local. Shopping at farmer’s markets and strolling through new neighborhoods might make your vacation destination feel like home.

Shake up your routine by taking your time.

An extended vacation could help to steer you out of your rut. The extra days away can give you time to see more sights and do more things without feeling like you must cram too much into too little time. You might also feel free to schedule a couple days where you aren’t doing very much at all. Walk through town. Spend a day by the pool. Take a book to a cafe.

Remind yourself that a vacation doesn’t have to be all action all the time. There should also be time to take everything in, reflect, relax, and enjoy some solitude. When you go home, hopefully you’ll be able to incorporate some of those slower things into a more grounded routine as well.

Earn some extra cash and make a difference.

In addition to helping you pay for your trip, working a few shifts at a place that needs short-term help could give you a chance to interact with new people and learn some new skills. If you’re thinking about starting a new company in retirement, you could work the conference circuit, investigate new test markets, or offer your services to local companies as a consultant.

“Voluntourism” trips are another great option for those who want to do more with their vacation than just see the sights. Use your extended stay in a new place to help a community in need or a cause that’s important to you.

Get more from your money.

A common misconception about extended travel is that it’s too expensive. But as with most money issues, that’s really a question of personal preference, perspective, and planning.

True, you’ll have to pay for more room and board. But if you look beyond hotels, renting a vacation house or Airbnb by the week might be cheaper on a per-night basis. Hit up the grocery store for the bulk of your meals and you might not spend more on food than you would at home. Once you’ve seen all the sights you would have seen on a three-day trip, your entertainment costs might drop to zero while you’re still having fun hiking, swimming, or chatting with new friends. And if you’re flexible about your return trip you might be able to save on airfare by booking on days when demand is lowest.

Maybe it is time to discuss if taking a longer trip could improve your Return on Life.