DIS and DAT-Individually, Are We Average?- July 2011

“Then there is a man who drowned crossing a stream with an average depth of six inches” ~W.I.E. Gates.

“If you’re so smart, why ain't you rich?” ~Eudora Welty

“Then the Grinch thought of something...he hadn't before. Maybe Christmas -- ...he thought -- doesn't come from a store. Maybe Christmas…perhaps...means a little bit more.”  ~Dr. Seuss, How the Grinch Stole Christmas!

The legendary investment manager Bill Gross is currently being talked about negatively in the media because he has said Treasuries are extremely overvalued, yet interest rates have continued to fall. He found himself in a similar position after his September 2002 comments that the Dow Jones Industrial Index if at  5000 looks fair. This reminds us of another well acclaimed fidelity Magellan manager, Peter Lynch. He published his theory on investment withdrawals from the article “Fear of Crashing” in Worth Magazine’s September 1995 issue. In that, he advised readers that they could safely withdraw 7% of their portfolios annually while being 100% invested in common stock. 

One wonders if these two individuals who have held long standing perches at the top of the Investment/Financial world can be so wrong? How come they are rich?

That question encompasses way too many variables to even begin discussing here. Instead, we believe there to be a few nuggets of wisdom to ponder from these examples. 

1. Maybe investment management isn't about hitting short-term home runs. Maybe it's more about having the periods when you are wrong, not wipe you out. Risk management is more important than being right in the short-term. 
2. The knowledge that we are going to be wrong. We are going to make mistakes, especially when judged every year, quarter, month, week, day, hour, minute, second on the market price of an investment. If we believe there are opportunities, by definition we believe markets do misprice investments. 
3. Relying on averages and past performance can be hazardous. In markets, prices and events are constantly changing. One would argue that ALL studies on withdrawal rates can be thrown out. None have had to deal with a 0% short-term Treasury yield before. 

We hope these thoughts remind you that you are an individual investing in a unique period. This has always been the case and will always be the case. So put your skeptical hat on when you hear chatter such as: this has worked in the past……… the average is…….. everyone else is investing here.

I hope you enjoy your summer! 

See you next time.

James Pope

Please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Diversified Investment Strategies, LLC DBA Advisor.Investments to effect any specific transactions for your account.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Diversified Investment Strategies, LLC dba Advisor.Investments), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Diversified Investment Strategies, LLC dba Advisor.Investments.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Diversified Investment Strategies, LLC DBA Advisor.Investments is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  If you are a Diversified Investment Strategies, LLC dba Advisor. Investments client, please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Diversified Investment Strategies, LLC dba Advisor.Investments current written disclosure statement discussing our advisory services and fees is available upon request.

Advisory Services through Advisor.Investments • A doing business as name of Diversified Investment Strategies, LLC, an SEC Registered Investment Advisor • Insurance Services through Advisor.Investments

Main Office and Mailing Address:  11939 Bricksome Avenue, Baton Rouge, LA 70816

Voice: (225) 292-0687 ~ Fax: (225)292-0006 ~ Toll Free: (866) 748-0687