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  • Poterack Capital Advisory

Your Objectives Shouldn’t Change with Investment Performance

Good financial and retirement planning allows for various unforeseen events and contingencies. You should be prepared for short-term (less than 3 years), middle-term (3-5 years), long term 5-10 years, and lifetime (10+ years) objectives and goals. Using short-term tools for long-term objectives or vice versa is unlikely to work out well for you. One of the more common mistakes I see people make is when investment growth strategies are used for an income objective!

There is absolutely no benefit in reacting to short term moves of any asset class. For my clients, I don’t put any position in their portfolio without a purpose, or in isolation. I have and will always respect the obvious fact that client accounts represent their money, not PCA’s or Ryan’s money! However, my financial success and lifestyle is tied to my clients. Every client could fire me tomorrow for any reason or no reason at all. This reality and responsibility inspires me to grow personally and PCA.

With investment accounts, held at Charles Schwab, I have no conflict of interest regarding nearly unlimited investment choices in the industry. If one of my clients is unhappy with an individual position, in isolation, that client may not appreciate that their (household) portfolio is intended to provide more value as a whole versus the value of each individual position separately.

When a client is frustrated with a $25,000 (example) position, I am also aware and frustrated because I may have $4 million or more of client money in that same position. Performance of every single position, and portfolios as a whole directly affects my income for good or bad. We want the same financial outcomes our clients want. Our access to knowledge, research, and investment alternatives is unavailable to a retail individual investor.

When there is negative performance, in an asset class that we want as a component of a client overall portfolio, this short-term performance is not controllable or predictable. I do my best, in life and business, to control only what is possible to control. My frustration may be equal to any client, but my reaction is likely to be less emotional and forward looking versus backward looking.

Long term client objectives call for long term investment solutions and mindset. My definition of long term is ten+ years and short term would be less than three years. Month to month, quarter to quarter, and even year to year is “noise” to a true professional. Presidential tweets, geopolitical events, and other uncontrollable and unpredictable events will occur in the short term, but the long-term trends of all asset classes is historically up.

Check out this year’s Callen Table (below) showing the calendar year performance, over the past twenty years, of major asset classes. You’ll notice that chasing the highest performing asset class, or dumping the lowest performer, from the prior year doesn’t often work out well the subsequent year.

2022 Callan Table
Download PDF • 176KB

One of my responsibilities is to represent various asset classes with some of the best securities (stocks, mutual funds, ETFs, etc.). We do this in a client’s best interests which in turn is in my company’s best interest. I have no interest in short-term relationships. With our new client selection process and the amount and quality of work my team commits to up front, we are unlikely to profit during the first year after bringing a new client on board. Long term client partnerships are essential to our company health and profitability. You are also seeking long-term health and profitability.

If you are not already a client, you should learn more about how we seek to improve client outcomes.

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