Timing can work against me in writing our monthly “Fun Facts…”. I wrote the February Fun Facts on January 31st, wherein I used the old Boy Scout motto “Be Prepared” for stock market volatility at any time. Little did I know that by the time it was posted, and most of you (all of you, right?) were reading it on Tuesday, February 6th that the stock was tanking. Fortunately, the month turned out to be a small dip.
Warren Buffet at Berkshire Hathaway, one of the most successful investors of all time, publishes his Annual Report in late February and it is always a good read. Among his quotes:
“When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That’s the time to heed these lines from Kipling’s If:
‘If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you…
Yours is the Earth and everything that’s in it.’ ”
Buffet also said, “Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. ‘Risk’ is the possibility that this objective won’t be attained.
“I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates. It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment ‘risk’ by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.”
My note: his statement that bonds increase risk means that bonds, due to their lower rate of return, may increase the risk that longer-term goals like a comfortable retirement may not be attained.
In closing, please join me in congratulating Kim Masco, Client Service Assistant, for being awarded an “Outstanding Women of Northern Kentucky” scholarship for her Bachelor Degree studies at Northern Kentucky University. Congratulations, Kim!
As always, please contact us with any questions, news, or comments.