Fighting the Last War

An old and partially true saying suggests that generals tend to prepare to fight the last war.  This also often applies to investment recommendations for the new year.  Financial services marketers will be highlighting what worked in 2021, brag about their successes and promote more of the same for 2022.  We aren’t going to make a list, but investments that did very well in 2021, some doubling or tripling last year, are unlikely to sustain exceptional growth rates over the long term.  Warren Buffet has said, “geometric progressions eventually forge their own anchors.”

There is a lot of investment advice on television and the internet, much of it contradictory, and often short term oriented. Investors will probably find it helpful to understand the spokesperson’s objectives, goals and compensation metric. Successful portfolio decisions tend to reflect an emphasis on long term strategies that include a balanced, diverse approach.  There is a significant difference in strategies that are essentially short term and those that focus on the long term.  It is incumbent on investors to understand the differences and decide, perhaps with the help of their advisor(s), which best suits their objectives.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA