By John Lunt, Lunt Capital
Memorial Day weekend was such a special time to remember those who have gone before and given us the opportunities we enjoy. Memorial Day was particularly poignant for those who have lost loved ones for any reason during our current Pandemic. Our hearts go out to you if you fit within this category.
We firmly believe the economy will ultimately come back, financial markets will ultimately come back, and we want all our family and friends to stay healthy and come back too! Thankfully, most people have remained healthy despite the pandemic. The financial and business impact for many are starting to slowly normalize. However, every person and family have been impacted in some way with changes to weddings, graduations, funerals, travel, and school/work plans. All of us miss the regular, normal social interactions we enjoyed at the start of 2020. Those losing loved ones, jobs, or businesses are experiencing a disproportionate impact. Let’s pledge to use our words and actions to remember those most impacted as we move forward.
We honor the heroism of our healthcare workers during this unique season. In the same breath, I believe it is appropriate to honor financial advisors— thoughtful, hopeful, resilient, and committed financial advisors whose steadiness and resolve have changed financial lives and protected financial futures during the last few months. More of this will be needed before we can declare victory. Helping individuals, families, businesses, and institutions recover and reach their financial objectives will require dedication to the Trek ahead.
At Lunt Capital, we love to talk about Treks. We talk about Investment Treks and Retirement Treks. We host an annual conference for financial advisors called ETF Trek. The concept of a Trek provides so many similarities to investing. Webster’s defines a Trek as a “trip or movement especially when involving difficulties or complex organization; an arduous journey.” For many, their Investment Trek’s destination is not reaching retirement but rather building and preserving wealth for a lifetime and beyond.
It is easy to look at long-term investment returns and forget about the complex, noisy, challenging Trek required to achieve those attractive long-term investment returns. A 30,000-foot view of investing obscures the headlines shouting the latest economic, policy, or geopolitical risk lurking around the corner. I often show a line chart of asset class growth since I started managing money full-time in 1998. It’s more than 20-year, uneven move higher is punctuated by regular, volatile periods—the dotcom bubble, 9-11, the Great Financial Crisis of 2008-9, the Greek Crisis, government shutdowns and debt downgrade, corporate and sovereign defaults, election surprises, natural disasters, wars, policy pronouncements, and pandemics. Navigating daily volatility and uncertainty is what the Investment Trek actually feels like!
Lest we forget, the past 20-year investment period also includes stunning innovations—technology efficiencies that touch every aspect of business and life, smart phones, streaming services, e-commerce, life-changing medicines and medical procedures, U.S. energy independence, and the adoption of ETFs (yes—ETFs belong on this list!) to name only a few.
Each Investment Trek is a daily, step by step journey on a challenging, uneven trail rather than flying comfortably above at 30,000 feet. Why don’t more investors succeed on their Investment Treks? Because in the face of the noisy, arduous journey they often do not allow asset classes and strategies to do what they are designed to do. They fail to recognize the characteristics that define these asset classes and strategies, leading to investment behavioral mistakes during the Trek. There are many thoughtful strategies and asset allocations that serve as important, useful tools during an investment Trek. However, there are certain common ingredients and a general recipe that seems to appear as part of many successful Investment Treks. Two ingredients stand out:
People Make the Difference. Each Investment Trek will be punctuated by daunting risks and surprising events.During these times, working with people with emotional steadiness, personal integrity, historical perspective, and subject matter expertise may make the difference between success and failure.
Preparation and Process Help Navigate the Expected and Unexpected. We expect volatile seasons during our long-term investment Trek. The timing, source, and flavor of the volatility and risks is often unexpected. Preparations that imagine a variety of potential outcomes and scenarios along with repeatable processes are essential ingredients for success.
These ingredients lead to a recipe that summarizes how we think at Lunt Capital: Commitment Breeds Resiliency, Which Encourages the Innovation Necessary to Adapt on our Trek. Those with a firm commitment to a successful Investment Trek become resilient in the face of risk, volatility, and uncertainty. This commitment and temperament only come to those who have really put in the work. False confidence fades and lack of preparation is exposed in times of crisis. Resilient Trekkers innovate—not by changing core values but rather by transforming practices, principles, and tools to meet evolving challenges. People, companies, and investors adapt to changing conditions or face failure on their Treks.
Surround yourself with the right people. Prepare and build a process. Develop commitment that breeds resiliency. Innovate and adapt as conditions change. A complex, noisy, challenging but potentially rewarding Investment Trek lies ahead!