Change in Investment Reporting
Investing is a long-term endeavor. That’s an axiom you’ve heard from us in a variety of forms. We discuss a long-term focus in our Investment Philosophy, we talk about long-term adherence in your Investment Policy Statement (IPS), and we reference long-term investment returns in your financial plan. It should be evident that the proper perspective for investing is… long-term.
With this focus on the long term, why do we provide quarterly reports? It is an industry standard. Unfortunately, even one year, three years and five years do not constitute the long-term for investing, yet those return figures are calculated as if they somehow provide value. It’s a clear mismatch between information flow and what truly matters, simply because “everybody does it.”
Rather than provide actionable information, quarterly reports actually tend to be counterproductive. When markets are doing well the tendency is to become comfortable, and clients often express a desire to take on more risk. When stocks do poorly, an aversion to risk often develops. A short-term focus creates the desire to do
something
, when the appropriate action is no action at all. These emotional swings are counter to a sound investment approach, and the emphasis shifts from patience toward anxiety and angst.
From a financial planning perspective, the only returns that truly matter are
future
returns. A strong quarter may create positive feelings, but it doesn’t provide any information about the long-term viability of a financial plan. We want to focus our communication efforts on what’s important to your life, rather than generating material that is unnecessary and distracting.
So the logical question is how do we measure progress on your financial plan?
- Each year, we provide an updated projection that reviews spending, saving, and growth of assets. This helps us determine if you are on track financially for your life goals.
- Investment account values can be found on your Fidelity and retirement plan statements and investment and net worth growth is reflected in your portal.
- With Fidelity online access, you will have a “Performance” tab which will show your returns, beginning and ending values, market change, income, fees, deposits, and withdrawals. The return percentages will be calculated as a total for the rest of this year, and in 2019 you will see year-to-date and one year performance return percentages.
Your last Quarterly Report will cover the third quarter of this year and will arrive in October. You will see values and returns on the Fidelity Performance Tab starting mid-September. We will continue to send commentary on the markets and the economy on a quarterly basis and will send periodic alerts to explain wide market gyrations.
We will work with you and Fidelity to link all of your statements into one document for mailing and emailing if this hasn’t already been completed. This will provide combined information on all of your investment accounts.
Our goal as a firm is to provide holistic, proactive planning that leads to financial peace. We believe that simplicity and an emphasis on meaningful information are both means to that end. As always, we are available to answer any questions you may have.
Warm regards,
The LPP Team
