The Value of an Advisor
Despite the increased cost paying for an advisor, it is often worth it. Many studies1 have shown that investors can add 1.5-4% to their long term portfolio returns, by utilizing an advisor. Ideally investors should find fee-only fiduciaries, which is a subset of advisors that have a better fee structure and are obligated to act in the clients best interest. Tines Capital is a fee-only fiduciary that wants to serve the best interest of our clients, and we are obligated to do so!
Patience and Consistency
The vast majority of investors underperform the market, and about 70% of it is caused by investors withdrawing their investments during periods of crisis2. We promote patience and consistency. To do this Tines Capital focuses on three primary objectives.
- Education: We believe that when clients understand their investments they are more likely to make cool, calm, and rational decisions even in times of market crises.
- Personalization: Every client has a different set of expenses, incomes, investment knowledge, and risk tolerance. We design portfolios that are tailored to client needs.
- Rule-Based Investing: Tines Capital uses a wide variety of investment methods, but they are all controlled by a set of rules to avoid irrational decisions in a time of market crisis.
Read More: Results of a Patient Investor
Invest in Businesses
Historically, it has taken about 8 years on average for an investment in the US stock market to double in value3. Of course, there are periods that the stock market drops dramatically and eight year periods that look very different. In good and bad times it is important to remember that stocks are more than just numbers on a screen. Stocks are legal pieces of ownership in businesses ranging from nuclear power plant operators to grocery stores. There can be no guarantee of what the future has in store for business worldwide, but we believe investing in large numbers of business is a great way to fund innovation and most likely make a profit – if you can be patient.
Invest In Governments
At times, the economy will go through recessions and businesses can drop in value dramatically. When this happens it can be extremely beneficial to be a lender to various governments, particularly the US government via US bonds. When businesses are in crisis US government bonds often go up in value. This can soften the blow of a declining stock market and provide funds to purchases businesses at a discount during the crisis.
Invest in Alternative Assets
Sometimes, stocks and bonds may experience declines at the same time. When this happens it can be good to have a mix of other assets such as real estate, currency, oil, corn, wheat, steel, copper, volatility products, gold, and even cryptocurrency. Few alternative assets can compare to the growth potential of businesses in the long term. However, like investing in governments, alternative assets can soften the blow of a declining business or government investments, enabling a quicker recovery.
Leverage When Appropriate
When done correctly, leverage in the form of a mortgage can be a powerful wealth building tool. Getting a fixed rate mortgage is a common way to buy a large asset with a small amount of money upfront. But not all mortgage types are worth the risk – as we saw during the 2008 financial crisis.
Similar to the housing market, the investment categories listed previously have a variety of ways to use leverage – some foolish and others judicious. When done correctly, leverage can be a powerful portfolio management tool. Depending on a client’s needs and desires, leverage of any kind may not be appropriate. However, certain types of leverage can be a powerful wealth building tool with a good risk/reward profile.
Balancing Active and Passive Styles
There is a large debate between active and passive investing styles, with lots of dogma in both camps. Most advisors seem to be believers in just one style and consider the other foolish. Tines Capital takes a balanced approach, acknowledging the pros and cons of both styles. We use whichever style or blend of styles best meets each client’s goals and needs.
- How would active vs passive trading done during the great depression?
- Can active trading with leverage have synergy?
Trust the Numbers
The stock market is often compared to a casino. This is a great analogy if you think of the investor as the casino owner rather than a patron. As the owner of historically appreciating assets (stocks, bonds, real estate, etc.) the odds are in your favor if you remain patient, calm, and consistent. There will be bad nights where your casino has to pay out to jackpot winners, and it is always going to be impossible to know with certainty what the next dice role, card flip, or lever pull will be. However, if your casino is built on math, probability, sound risk management, and patience, the casino can make significant amounts of money over the long-term.
How good are the Results?
Previous returns cannot guarantee future results, and the future is always uncertain. However, we believe the concepts described above can create a fantastic portfolio for you. If you want to see how powerful these concepts could potentially be, check out this simplified walk through.
How Can We Help You?
Whether you are unsure how to invest for the first time or you are a market veteran, we are here to help you!