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Client Letter July 2015

Client Letter July 2015

Benchmark Returns June 30, 2015

We wish you a happy and healthy 4th of July weekend. Here’s hoping that you spend the next few days thinking more about barbecues and bottle rockets than the ongoing fireworks in Greece and investment markets.

 It’s with gratitude that we take a moment to reflect on the meaning of this most American holiday, and on the confidence and trust you place in us as your advisers. Our focus continues to be your financial independence – the freedom that comes from taking charge of your financial future.

One of the important things you can do to increase your chances of success is to compartmentalize your thinking as to things that truly matter in your financial outcomes, and things that don’t. Greece is in the “things that don’t matter” category, and it’s not even close.

If you’d like to understand the key factors involved in this economic impasse, The New York Times has been running “Greece’s Debt Crisis Explained,” updating it regularly as events unfold. If you’d like to know more, or you’re wondering whether there’s something that you, as an investor, should be doing in response to the Greek crisis, let’s talk. But here are some points to bear in mind, in the meantime.

First, as always, we don’t know what the future holds, for Greece or anywhere else. Even more to the point, we don’t know how the market will react to whatever does happen in Greece. This is why we advise those who already have a carefully planned, globally diversified portfolio in place, to keep that portfolio in place (unless your own long-term objectives or circumstances have changed).

Remember, it’s not good or bad news that sets future market pricing, it’s whether the next news is better or worse than the market has been expecting. Peer into the future all you want, but an unknown reaction to an uncertain outcome is inherently unpredictable, no matter what we know now. Approach anyone who claims to believe otherwise – including your own inner doubts – in the same way you would consider accepting a Trojan horse through the gates that secure your wealth. If we can help you send that horse packing, please be in touch!

When you create an investment plan, ostensibly to meet the requirements of your financial plan, it’s critical to have a clear mind about whether you’re going to be a trader/speculator, in which case you might move in and out of markets around short-term movements, or an investor, in which case you adopt a risk appropriate allocation in stocks and lower risk investments while riding markets’ ups and downs, always keeping an impregnable focus on capturing and compounding interest, dividends and appreciation that comes from the effects of gradual growth in population, productivity and innovation.

We think the investors’ approach makes the most sense. Speculation isn’t un-American, as Ben Graham wrote, but just not likely to be profitable, especially after one considers trading costs, taxes and the probabilities associated with trying to make a succession of fortuitous calls over the course of an investment lifetime, and to do so against millions of competitors trying to do the same. Financial planning is all about increasing the predictability of a lifetime cash flow plan, and enjoying many worry-free July 4th celebrations!

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