letterDear friend,

Although you just opened a holiday card from me with a heartfelt note and happy pictures of both my work and home families, I feel the need to reach out to you yet again as 2018 begins. A few thoughts have been quietly knocking at the back of my head for some time, and the longer the markets remain in bullish territory, the more insistent the knocking becomes.

Times are definitely good for investors right now, but they can’t and won’t always be this good.

As a behavioral financial advisor, it is my duty to help you stick to your long-term investment strategy – in good markets and in bad. My goal is to prevent you from responding to market mania and/or the inevitable bubble bursting by making drastic changes to your investment portfolio, which is one of those big predictable investor mistakes you have likely heard me mention. To that end, I believe that now is the optimum time to walk you through the guiding principles that inform everything we do for our clients at DeYoe Wealth Management.


In my experience, most successful investing is goal-focused and plan-driven, while most failed investing is market-focused and performance driven. In other words, I believe that truly successful investors act mindfully according to their specific plan and most failed investors are continually reacting to economic and market “news.”

Our clients create multi-decade (or multi-generational!) financial plans for the purpose of funding educations, retirements, and legacies. These plans are designed to be viable far beyond the current news cycle. My hope is that the nonstop noise of the financial media is reduced to a soft background hum in your life. While you and I can’t help but hear that hum, we should make no attempt to infer an investment policy from it.

We know what we know. We don’t know what we don’t know. The future is impossible to predict, so we won’t attempt to forecast the economy or time the markets. No one can consistently project the future relative performance of specific investments based on past performance, and we refuse to try. In a nutshell, we are planners not prognosticators. We believe our highest value to you is our planning and behavioral coaching designed to help you not overreact to the “noise.”

The essential principles of portfolio management we follow are simple:

  1. The short-term performance of your portfolio relative to a benchmark is irrelevant to your long-term financial success.
  2. The only benchmark that matters is whether you are on track to accomplish your stated financial goals in your financial plan.
  3. Risk should be measured as the probability that you won’t achieve those financial goals.
  4. The exclusive objective of investing should be to minimize that risk to the extent possible.

Our essential portfolio practices are simpler still:

  1. Asset Allocation determined by your financial plan.
  2. Broad Diversification
  3. Long-Term Focus on:
    1. S. & Global Equities
    2. Seeking Value
    3. Profitable Companies
  4. Rebalancing

Once a client family has worked with our team to put a long-term plan in place and funded that plan with the investments that seem historically best suited to achieving their financial goals, we very rarely recommend changing the portfolio outside of rebalancing. In brief, our principle is this: if your goals haven’t changed, don’t change the portfolio. Our belief is that the more often people change their portfolios, the more opportunity there is for those changes to become driven by fear and greed relative to daily headlines. We mustn’t fall into this trap.

No one can invest directly in an index, but the average annual intra-year decline of the S&P 500 is about fourteen percent if you look back as far as 1980. Yet, even without counting dividends, annual returns of the S&P have been positive for 29 out of these 38 years. Furthermore, the Index has gone from 106 at the beginning of 1980 to 2,670 at the end of 2017.

We believe the most important lessons of investing can be drawn from those simple data points: Temporary market declines have historically not translated into a permanent loss of capital. The most effective antidote to this normal market volatility appears to be TIME.  I can’t say it will always work out this way, but so far it has. We heed the words of investor and philanthropist John Templeton: “The four most dangerous words in investing are ‘It’s different this time.’

The very nature of investing requires practicing rationality under uncertainty. We’ll never have all the information we’d like about what lies just around the bend. We are investing in and for an unknowable future. Therefore, we adhere to investment principles that have thus far yielded the most favorable long-term results over time: planning, rational optimism, patience, and discipline.


Global Growth: 2017 is notable to me as the first year of this century where all the economic basins of the world were growing simultaneously. This synchronous global growth is, I think, an underappreciated positive that will carry into 2018.

U.S. Grows and Emotions shift: Our steady plow-horse economy shifted into a higher gear in 2017. It looks like we are steadying at a higher level of 3% GDP. Americans are feeling a little better, as well. Unemployment is down to 4.1%, retail sales are robust, consumer balance sheets are healthy, and household wealth may have reached $100 trillion for the first time ever this quarter. These are unalloyed positives.

The Fed is Normalizing: The Fed has been raising rate very slowly. There is promise that this will continue in 2018. At the same time, they are unwinding their great recession balance sheet, albeit equally slowly. Both of these are happening with little ill effect on the overall economy. This isn’t “tightening” in any more than a technical sense yet. We have merely moved from a ludicrously loose policy to a ridiculously loose policy. I expect in 2018 we will move towards incredibly loose policy. Any way you slice it, we still have a stupendously loose monetary policy.

Equity Performance: 2017 was a genuinely great year for equities. The S&P500 was positive every month of the year. Its total return was north of 20%. And the deepest mid-year drawdown was a mere 3%. By comparison, the average drawdown has been about 14% since 1980. Our philosophy of staying the course post-election was richly rewarded with both excellent returns and minimal volatility. I remain positive for 2018, but I would not expect either the same high level of returns or the low levels of volatility to repeat. We’ve just had dessert, and it was delicious.

Valuation Hysteria: The current frenzy over valuations reinforces my long-held belief that short-term trends should not inform portfolio decisions. As long-term investors, we can generally tune today’s valuation hysteria out. I believe our practice of rebalancing is the best way of managing through periods of over-valuation or under-valuation. That said, I don’t believe that equities are importantly overvalued here. It is always a question of where else can you put your money. Compared to yields on competing fixed income investments, equity valuations appear to be pretty reasonable, even if a tad on the high side in the US.

On January 31st of 2018, we will be doing our Forecasts: Past and Present event at the Hotel Shattuck Plaza. I invite you to come and recap 2017 with us, and chat more about what those financial pundits are saying versus what we are thinking about 2018. Expect the invite to hit your email inbox shortly and RSVP quickly. I look forward to seeing you there.

I understand and deeply appreciate the level of trust you are placing in us. These will continue to be the fundamental building blocks of our investment advice in 2018 and beyond.  I am always open to discussing your particular financial plans, markets and economies, or our philosophies of engagement.

Thank you,

Jonathan K. DeYoe