February Insights: The Power of Rebalancing, Gold vs. Markets, and Long-Term Investing
I hope you're doing well! As we step into February, I wanted to share some timely insights on portfolio strategy—particularly the importance of rebalancing, maintaining a long-term investment mindset, and how different asset classes, including gold, have performed over time.
The Discipline of Rebalancing
Each year, different parts of your portfolio will outperform others. This natural shift can create imbalances, increasing risk in ways that may not align with your long-term plan. Rebalancing ensures we systematically trim positions that have surged and reinvest in areas that may be undervalued, keeping your portfolio aligned with your goals.
History has shown that markets move in cycles, and maintaining a disciplined, diversified approach can be a key factor in long-term financial success.
Investor vs. Speculator: A Critical Choice
A key question to ask yourself: Are you an investor or a speculator?
• Investors follow a long-term plan, making adjustments based on personal goals, not short-term market trends.
• Speculators react to economic news, political shifts, or hot sectors—often missing the bigger picture.
Equity Markets vs. Gold: A Long-Term Perspective
For those evaluating different asset classes, it's worth looking at how gold has performed compared to the stock market and inflation:
• Gold’s Growth: Since 1963, gold has increased from $35.09 per ounce to approximately $2,820.94 per ounce today. This means gold has doubled about 6.5 times over the past 62 years.
• Stock Market Growth: Over the same period, the S&P 500 has increased 78x, rising from 75 to 5,881, with dividend payments growing 31x.
• Inflation Comparison: The Consumer Price Index (CPI) has risen 10x since 1963.
While gold has appreciated significantly, its returns have been volatile and heavily influenced by economic cycles, monetary policy, and inflation expectations. Unlike equities, which generate earnings and dividends over time, gold's value is driven primarily by demand and sentiment.
Staying on Course
Market fluctuations and asset class trends will always come and go, but the fundamental principles of long-term investing remain the same. Maintaining focus on your personalized strategy helps navigate shifting market conditions with confidence.
If you have any questions or would like to review your portfolio's positioning, let’s schedule a time to connect. Once you’ve filed and uploaded your 2024 tax return to Holistiplan, please schedule your Spring Strategy & Tactical Meeting.
Looking forward to catching up soon!
