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  • Glenn D. Surowiec

What You Should be Asking at Year's End

We can’t change the past, but we can look to the future.

How’s yours?

Are you satisfied with your life—your family, your friends, your work, your home, your health? What are the things you can (and want) to change, and what things can’t you affect, in the coming year?

I don’t mean anything as silly as New Year’s Resolutions, which are usually in the wastebasket within a month (amazing how many great buys on exercise equipment you can find on Facebook Marketplace by April.). I’m talking about taking a long-term look at how you can make choices that can have a huge impact on the financial quality of your retirement. Making decisions about change can help you have the life you want, as opposed to fatalistically resigning yourself to letting things just occur and hoping for the best.

So, what can you ask yourself (or your financial advisor) before the clock strikes midnight and launches a brand new year?

How can I review my retirement investments?

Annual reviews are a good time to determine what you don’t understand about your portfolio and the market, and get clarification on holdings, strategy, market commentary, etc. For those who have outsourced their investments to a good manager, an annual review is a good time to review yearly performance, and then get manager expectations for the upcoming year. An ‘eyes-on’, ‘hands-off’ approach is best adopted here.

Are you with GDS Investments? We provide a mid-year and a year-end investment update for our clients, providing an update on our holdings and strategy looking ahead.

What is your investment strategy?

What type of strategy do you/your manager use, and are you comfortable with the cumulative results over the past five or ten years? One year is definitely too short of a time frame to measure results for an investment strategy of years, if not decades. But your strategy should be clearly defined and reconsidered each year – even if your conclusion is to stay the course.

Do your investments still fit your goals and temperament?

For example, if you’ve chosen a value strategy or value manager, are your investments aligned with that strategy? Have you been receiving communications about how the strategy has performed, and how it’s likely to perform moving forward? You should be paying attention to any inconsistencies in strategy/portfolio measured against communication. For example, if your manager is preaching equity bullishness, but you’re 60/40 stocks/bonds, why the fixed income safety net? If you’re manager is value focused, and you happen to own some of the FAANGs (or similarly widely-covered names), what is he telling you about how this fits into the strategy?

What questions should you be asking?

Questions about specific holdings and forward return expectations are applicable at year end. If you don’t understand something, stop and demand a cogent explanation. If you don’t get one, don’t assume that it’s beyond your grasp. Warren Buffett famously said that he only invests in businesses he understands (which is why he avoided the bubble tech companies in the late 1990s). You should understand the details of your investment manager’s strategy, in clear English.

Ask your manager about being opportunistic while staying aggressive. Questions about managing risk are helpful at year-end, and understanding how your manager handles portfolio protection is important. You should discuss issues such as holding cash, fewer equities, value-focused, avoiding high multiples etc. and how these apply to your investment strategy.

Finally, ask about fees. Even if you love your manager, you’re still investing for your own future. Are you getting the best return on your investment in the manager’s advice? This is a delicate question because there are now a plethora of low- or no-fee investment platforms, or DIY investment platforms where it would be easy for any client to say ‘I’ll just index’ or move to a robo-advisor. However, some managers really do add value and justify fees, so understanding and asking questions surrounding the difference between the two is crucial. For example, would it be beneficial to index a portion of my assets at this stage? (I’m biased, but the answer is ‘no’).


Remember: the financial media is not your friend!

Ignore Broad Market Commentary (or else you’ll drive yourself crazy!). Whatever one is seeing in the financial news media should almost always be ignored or avoided. Fear-mongering may be great for ratings or clicks, but it’s not helpful at any stage of an investment cycle. In fact, hopefully you have a manager doing the opposite of what the general population is saying or doing.


What should the focus be for the upcoming year?

Besides a careful reexamination of your investments at least once a year, I urge you to avoid “noise” and “shiny objects”. Investors harm themselves dearly when they abandon a well-reasoned investment strategy to chase hot funds, asset classes and popular, high growth names.

If your investment strategy doesn’t require change, then stay the course, and focus on the long-term. Value has underperformed, but there is significant room for intelligent, patient, disciplined managers to improve on value investing with active security selection. The ‘value spread’ (difference between cheapest and most expensive stocks) is incredibly wide right now – growth expectations cannot be very high for these high growth businesses with incredibly high multiples of sales or earnings.

Growth expectations may be lowered in an economic downturn or recessionary scenario (something we keep hearing more and more about) which will further favor value managers. Focusing on owning high-quality businesses with strong balance sheets and sustainable earnings power in all economic environments should always be the focus! Having optionality at all times (especially at times like these) can be crucial for future returns – temporarily holding cash is not the end of the world.

In conclusion, I actually have some good new year's resolutions for you, from the mind of a financial advisor:

First, have patience. Focus on being patient and sticking with your investment strategy. Tactics may change, but strategies usually don’t.

Second, try to take regular walks, and stick to the salad bar part of the buffet — no matter how much you have saved or wisely invested, retirement is only as much fun as our bodies allow. Take care of yourself this year, and your finances won't be the only thing you've set up for long-term success.

Finally, review your bucket list, and see if you can check off any items, or if you have new personal goals to add. What you aim to achieve and do, should be the true driver of your 2020 financial plans.

Here’s to a sensational 2020 for all!



Glenn D. Surowiec
Registered Investment Advisor
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