With the third quarter of 2017 behind us, let's review some of the returns from different areas of the markets through the end of September.
The U.S. stock market continued to grind higher, with the S&P 500 rising about 4.5% during the quarter, bringing year-to-date performance to a very solid 14%. Small company stocks, which had been underperforming all year, changed course during the quarter, besting the S&P 500 with 5.7% but are still lagging year-to-date at about 11%.
Being diversified and having an appropriate asset allocation is boring. That's what many people think, especially after the stock market has been on a tear for a while. A year like we've had so far helps accentuate this sentiment. When you're diversified, you don't have a large amount of your portfolio invested in the so-called FANG stocks (Facebook, Amazon, Netflix, and Google) that have done so well this year. You might have a small amount invested in them, so your portfolio does benefit, but you're not seeing the outsized returns that can come from investing heavily in a few stocks that happen to be doing well at the time. But you're not in danger of being bitten either. That's the tradeoff and it can be a tough pill to swallow sometimes.
Trade settlement isn't something most investors think about, but it's important and has an interesting history. We tend to take for granted that which we don't see and the process of settling an investment transaction is one of these seemingly invisible things. It just happens. In the past the process has taken several days and sometimes weeks, but a recent change going into effect today is making the process just a little faster.
As strange as it may sound, a large part of the value I provide to clients is in what I don't do. I don't, for example, recommend that client's buy opaque, illiquid private investments. I don't try to push clients into costly and complicated annuity contracts that likely won't live up to expectations. I don't buy investments for clients that are easy to buy but hard to sell. And I don't deceive or otherwise swindle clients out of their hard-earned retirement savings. What's the value of what I don't do? It could well be priceless, although you'll never see it on a statement.
Last week was a busy news week, what with the aftermath of Hurricane Harvey and the coming of Irma. Because of this you may have missed that Equifax, one of the three largest credit reporting agencies in the US, announced a massive data breach impacting millions of people. After several security problems in recent years, it's natural to feel exposed, whether our information was part of the breach or not. And it's natural to wonder what we can do to help protect our personal information online.
There has been an evolution, of sorts, moving slowly through the financial services industry in the last several years. You've heard about this before, how there's a wave of interest in all things fiduciary. Investors are seeking more transparency around conflicts of interest, fees, and issues like that. But a large part of this is a reaction to just how complicated it is to invest these days. Tens of thousands of mutual funds, active versus passive, publicly-traded and private investments, annuities, alternative investments, the list goes on and on.
