Quarterly Commentary

Welcome to the Next Quarter Century!

January not only marks the start of a new year but also the close of the first 25 years of the 21st century and signals the dawn of the next. For some of you, our partnership spans this entire quarter century—a remarkable journey that invites us to pause, reflect and review.

Throughout our investing experience, risks always seem to be looming. We often ponder the potential threats to our life savings and consider how we can protect them. It’s human nature to want to act when faced with uncertainty—to do something rather than do nothing and to advance our goals. However, in investing this impulse to act can often lead to costly mistakes.

The investment management industry, particularly Wall Street and the financial media, has capitalized on this human instinct. They’ve tried to convince us that active management strategies can yield superior outcomes compared to a passive, index-based approach. Nevertheless, academic research has increasingly proven the opposite. Mistakes such as attempting to time the markets, forecasting the economy, or selecting individual securities can be particularly damaging. Such strategies often lead to inferior results, higher investment costs, increased taxes, and a greater probability of diminished investment returns.

Moreover, failing to consider important factors like hidden costs, proper asset allocation, and risk management can erode our portfolios. In his book Winning the Loser’s Game, Charles Ellis—considered a pioneer of index investing—compared investing to the sport of tennis. Success in tennis isn’t about hitting winning shots; it’s about making fewer mistakes than your opponent. It is similar with investing. Making prudent choices is far better than reacting emotionally. Though we have been tested, we have continued to help investors make deliberate and wise decisions over the last quarter century.

This philosophy has guided us for many years and certainly over the last 25. The century began with Y2K concerns. Some speculated that computers wouldn’t be able to handle the calendar change. Then came the uncertainty of the contentious 2000 presidential election, the tech bubble burst, and the September 11th terrorist attacks which all set a rocky tone for the 21st century. After that, the Sub-Prime Financial Crisis, the COVID-19 pandemic, and the inflation-driven downturn of 2022 further tested investors' resilience. All in all, the last 25 years produced four bear markets, each exceeding a 25% decline, and each varied from months to years in duration. Despite their downturns, their subsequent recoveries underscored the importance of staying the course.

Thankfully, our approach of broad diversification and proper asset allocation along with helping our clients manage cash flow and taxation has stood the test of time. Supported by a dedicated team, our clients have not only endured these challenges but ultimately thrive as their portfolios continue to grow.

While the past quarter century closed with a couple of good years in the market, we know that turbulence will inevitably return. Still, with our steadfast academic approach, we are confident in our ability to guide you through the next season of challenges and beyond.

As always, please don’t hesitate to reach out with any questions or concerns. We’re here to help you stay on course and achieve your financial goals.

Fort Vancouver Investment Management, LLC