By Scott Moser

Closing out the 2nd decade of the 21st century and kicking off the 2020’s warrants some extra reflection. The new decade is certainly starting out with a bang and few can complain about the progress investors made last decade.  While the U.S. generally escaped a bear market for the entire past decade, it certainly hit some large pot holes like the 2018 4th quarter correction which nearly hit the bear market zone of a 20% loss from the highs.  International markets weren’t so lucky, many dipped into bear territory in 2018 and consistently underperformed U.S. stocks during the decade as demonstrated below.
10 Year Cumulative Total Returns
Source: FactSet

We finished the decade on a strong note where most clients met or exceeded their target benchmark returns for 2019.  Apple was the largest holding in our composite and since it doubled in value over the past year, benchmarks were much easier to attain.  Many clients that have been with us for the past 20 years have Apple stock with gains exceeding 5,000%.  The outsized returns achieved in the technology sector helped to take the sting out of the marginal gains, or even losses that clients incurred on some international holdings.  While our buy and hold strategy worked incredibly well for technology holdings, our commitment to keeping portfolios diversified has presented some challenges during the last decade.  Nonetheless,  we have remained committed to our founding investment principles:

  • holding investments for the long-term
  • staying diversified
  • minimizing trading fees, income taxes & turnover
  • avoiding the latest fads, media hype and product Wallstreet pushes. 

We believe portfolio construction should be simple and transparent.

One recent develop for investment costs is that Schwab started a price war last November by cutting trading commissions to zero for stocks and ETFs.  We recommend investors view the price war with a measure of skepticism.  While we support the trend to lower costs, stock trades are not free and eliminating trade commissions may lead to lower transparency of investment costs.  Stock trading still includes buy and sale spreads which are difficult to measure.  Additionally, the main revenue source that supports “zero cost trading“ is the interest spread on what Schwab does not pay customers on idle cash in accounts.  We have increased monitoring of idle cash to be sure those funds are regularly swept into money market funds where competitive interest rates are now available.  This process requires more coordination with clients to be sure funds are available to satisfy cash withdrawals but our efforts can easily generate an additional $2,500 of income each year, making it well worth the effort.  

We don’t take your business for granted;  please let us know how we can improve your experience and Thank You for another successful decade.