Good morning, good afternoon, good evening. Depending on the part of the world you’re in. This is Jonathan Satovsky of Satovsky Asset Management and on today’s episode of “Seeking Wisdom, Wealth, and Wellness,” I want to talk about the concept of absolute versus relative returns, and how to manage expectations when there are persistent negative headlines.
First of all, I just want to point out that, in the last 25 years, if you bought and held, virtually anything—REITs or U.S. stocks, a 60/40 portfolio of stocks and bonds—you would have performed very nicely. Twenty-five years. Now it’s not a straight line, mind you, but you would have performed pretty nicely. That being said, there are always day in and day out, week to week, year to year, there are pockets of extremely odd behavior that get people scarred, spooked, freaked out, that make people think that the markets are a casino because people buy unprofitable businesses and bid them up to the moon and profitable businesses sometimes get marked down significantly. Listen, if you want to get rich you can concentrate your assets on one to five companies and get very successful. Concentration and leverage can get you enormously wealthy. It can also cause you to destroy wealth very quickly.
So creating a diversified portfolio and global markets being down 20 to 30 percent and you being down 15, it’s not comfortable. Of course, you’d want to be flat or up, but if you look around there will always be someone that’s flat or up during that moment in time. And if you abandon your path to run toward what was working yesterday, perpetually buying yesterday’s winners, you’re shooting yourself in the foot. So, try to calibrate for an equilibrium that you can stomach. Honestly. That you can stomach for multiple generations and stay on that path. I mean you really need to be, like, tied to the post like in The Iliad and The Odyssey, you know, it’s amazing how frequently the sirens get into people’s heads. So in working with someone over 25 to 50 years, it takes constant re-taping someone to the post to keep them on the straight and narrow for their own long-term benefit, and they will thank you 10 – 20 years from now, hopefully with a cocktail in hand, saying “thank you for getting me here and forcing me to stay disciplined.”
Have a great day.