Short-Termism

According to the CFA Institute, Short-termism refers to an excessive focus on short-term results at the expense of long-term interests.

Short-term performance pressures can result in an excessive focus on quarterly (or yearly for that matter) performance, with less attention paid to strategy, fundamentals and long-term value creation.

It is a problem at the corporate level because investors, so very focused on instant gratification, pressure boards of directors and C-suite executives to increase their efforts on getting a better share price in the near-term over spending on long-term investment research and development opportunities. This has been prevalent with the ongoing share-buyback programs that have helped drive share prices to their current levels.

This same short-termism is also prevalent at the Wealth Management level. So often I hear the conversations that are focused on the most recent returns (much of which is usually just "hearsay") which can include all sorts of different measures that render comparisons relatively useless.

Compared to the benchmarks? which, as I suggested in a blog last week, are basically flat thus far in 2018 and with what kind of risk profile?

If you have got a 7% year to date return you are likely over-weight in the U.S. equity market. That may be good for the moment, but it may also be very fleeting. That 7% could vanish in a matter of days if we see the kind of volatility that we saw in February return to haunt equity markets.

At High Rock we make the best attempt to focus on the Long-term. Our client's Wealth Forecasts can stretch out over decades (depending on their age of course). Over decades we are going to have multiple economic and investing cycles and within each of these cycles there are going to be optimal times for investing and taking risk.

Taking large amounts of risk now, at the tail end of an economic expansion can be portfolio suicide. Taking appropriate amounts of risk at the appropriate time (best time to take more risk is at the beginning of the cycle when everyone else is fearful of risk) and managing this process is what we are paid to do.

That and to get the best possible risk-adjusted returns over multiple years to meet your goals over decades-long time horizons for retirement and beyond (depending on your personal goals of course).

Chasing short-term returns at the expense of your long-term goals is gambling. At High Rock, we are stewards of Wealth, not gamblers.