The Year That Was

As the year winds down to a close it is an opportune time to restate a few of our deeply held beliefs and make a few key observations about what we experienced in the financial markets this year.

We know that for many of you 2021 was a disappointing year. Hopeful of a return to normal, we instead experienced an extension of last year.

Whatever the next few weeks may bring, we believe that the principles we stand firm on will continue to provide a solid foundation for the money decisions you will need to make into the future.

Eternal Truths

Our beliefs are countercultural, and are likely to remain so forever.

Our approach to financial planning is goal-focused and planning driven. While failed investors react to events in the economy and the market, we insist on proactively acting on a plan. This plan is informed by your cherished goals.

Once the planning is done can we fund the plan with a suitable portfolio.

While each new world event brings with it uncertainty and a crowd of prognosticators, we make no attempt to forecast, much less time, the global stock market. Anyone who claims this ability should be avoided.

We only make changes to the portfolio when your goals change, not when the market scares us.

Lastly, we define risk not as market volatility but as the chance of not achieving your goals and running out of money in later life. We're happy to hold your hand during the scary times so that you can have an independent retirement and leave a legacy to the people and causes you care about.

Another Good Year

The news cycles saw a few themes emerge this year. A lot of airtime was devoted to Covid (understandably), but supply chain challenges and the return of significant inflation have been recent sources of uncertainty.

The year may have been disappointing on many fronts, but it has delivered financially. While the front pages continued to be filled with pandemic updates, and the back pages thankfully had sport to comment on, world markets have quietly marched upwards.

The world market index is (at the time of this writing) up by 16%, after gains of 14% and 25% the two years before. These figures may seem incredible to those who've only been exposed to negativity for close on two years.

The great companies of the world continue to make profits, with this being either reinvested into attractive projects or distributed to shareholders. As an owner of these companies you passively benefit from human ingenuity.

Based on historical returns we know that we experience negative returns on average every four years. 2021 is the third year of positive returns. This is not a prediction, but it's a data point worth knowing.

What shall we do with this knowledge? As we reminded you above, we believe that portfolio changes are only necessary when your goals change. We therefore encourage you to remember that the only way to be sure of capturing the full market return over the long-term is to ride out the frequent (but temporary) declines.

Looking Forward

We're confident that what we've been through before will help us as we confront the future. While history may not repeat itself, it does tend to rhyme.

We wish you a safe and happy holiday and hope that the coming weeks will provide you an opportunity to do things that bring you joy with the people that you love.