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  • Frank Byrd, CFA

Lest We Forget

Amen of the Week

“Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray...

For the great majority of investors ... who can – and should – invest with a multi-decade horizon, quotational declines are unimportant. Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime. For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.”

- Warren Buffett, Investor Berkshire Hathaway 2014 Annual Report

Welcome to another bear market. Stocks go up and down. That near-term uncertainty is the price that we pay for the potential to earn higher returns over the long-term. When we suffer through these inevitable declines in our portfolio values, it’s important that we understand what we own and why we own it. Otherwise, we become vulnerable to losing confidence and selling at the wrong time.

Now might be a good time to watch the replay of our webinar, conducted earlier this week, in which we discuss “The Biggest Myth”. There is a widespread belief that the stock market goes up 10% per year over the long term (from any price level). We discuss why this is a naive assumption. We also share our conclusions on what types of stocks should be avoided as markets reach expensive levels.

Yours in the Field,

Frank Byrd, CFA


While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

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