What have I said (and done) this year? Following are some excerpts from recent D&A blog posts prefaced by a brief sound bite of our “truism”:
1. This was a great year for mega-cap tech stocks and a tough one for dividend-payers and others, but don’t think you can outguess the market and throw diversification out the window; you can’t!
https://www.dattilioash.com/our-blog/2023/10/15/what-should-i-do
As we all know, aside from the Magnificent Seven, dividend payers (mostly financials and utilities), small/mid-cap, and international/emerging markets have all struggled badly this year and detracted from account performance, but I am expecting that they will recover over time thus rewarding investors who “stayed the course!”
2. Though D&A is a strong believer in long-term strategic investing, “tilting” portfolios away from targets to capture incremental returns is warranted when the underlying economics support a view.
https://www.dattilioash.com/our-blog/2023/9/19/forecast-foibles
As readers of this blog are well-aware, D&A is a long-term strategic investor favoring broadly diversified exposures, but is aware of market trends and will tilt portfolios to capture incremental returns when situations are warranted. Such is the case in 2023 where excess cash in many portfolios was allocated into short term bonds and U.S. Treasury Bills yielding over 5% (annual); this is likely to continue and be expanded as we move into 2024. Likewise, in some client accounts we have begun to overweight equity allocations into higher quality positions.
3. There are broad model portfolios of stocks and bonds that could meet some investor needs, but D&A prefers a customized approach to strive to meet client needs.
https://www.dattilioash.com/our-blog/2023/8/24/whence-inflation
D&A strives to manage investment portfolios designed to help clients achieve their goals. Over time, allocations to stocks have been a good inflation hedge and bonds have been a good diversifier to smooth portfolio risk. Each D&A client has a stock and bond target asset allocation customized to their risk profile as we strive to beat inflation over time.
4. Though some individual stocks have done very well in 2023, it is very difficult to identify the winners ahead of time.
https://www.dattilioash.com/our-blog/2023/5/25/youre-fired-an-nvda-essay
Investing is a risky business and needs to be managed prudently to help clients achieve their goals. Though NVDA has “knocked it out of the park” this year and has helped the broad U.S. equity market perform well as a component of the S&P 500, it didn’t always look that way back in 2022. D&A strives to gain steady portfolio performance aligned with market benchmarks to counterbalance the risks associated with individual stock investments.
5. As much as the past few years have not been too kind to diversified portfolios, D&A still believes in the approach and fine-tunes it as the markets rotate.
https://www.dattilioash.com/our-blog/2023/5/2/the-diversification-dilemma
So, I do not believe it is now time to re-write the textbooks and throw diversification out the window, but what do we do? At D&A we are strong believers in long term strategic investing across a broad range of major asset classes and will continue to seek solutions to diversify client portfolios. For example, last year we added an allocation of short term investment grade bonds (SLQD) to all client portfolios; we will do more of this kind of rebalancing over the near term.