Investments: The “How” Changes, But Not The “Why”

By James Moore, CFP® 

“Investment philosophy: 

  • Investment diversification is of key importance, especially in today’s uncertain economic environment. 

  • Take no more risk than is necessary to accomplish your goals. 

  • Tax savings take second place to sound economics in an investment. 

  • Consider the complete cost before getting into an investment: commissions, fees, management expenses.” 

-Excerpt from an Eclectic Associates financial plan written for a client in 1988 

Relevant Artifacts 

Eclectic Associates began in 1984, which makes 2024 the 40th year that we have served our clients. One of the ways we celebrated this 40-year anniversary was by recently hosting an open house event for our clients in our Fullerton office. As a part of this celebration, we filled up our conference room with a collection of interesting financial “artifacts” that we have collected over the years. This included some of our favorite investing books, newspapers saved from significant moments in financial history, and a collection of financial plans and letters written to clients in the early years of Eclectic Associates’ existence. 

I particularly enjoyed reading through some of the early financial plans and letters we had written to clients. While much has changed over the last 40 years, it was evident that our investment philosophy has remained the same. The excerpt above was written 36 years ago, but the investment philosophy section in the financial plans we write today is practically identical. Our steadfast investment philosophy is one of the primary reasons why our clients, and therefore our company, have thrived over the last 40 years.  

The Why 

At Eclectic, we focus on the long-term and not the short-term. We think it is impossible to predict the future. We value diversification. We think taxes and expenses should be considered as a part of all investment decisions. Risk is an inherent component of investing, but the risk taken should be appropriate for each client. We value research and due diligence before making any investment decision. 

Our investment philosophy will never be exciting to everyone. We generally won’t be involved in the latest-and-greatest hot new investing trends, but we strive to have a philosophy that will allow our clients to reach their financial goals no matter the market environment. 

The How 

Having a consistent investment philosophy does not mean that we never change or improve in other ways. The world of investing has changed greatly over the last 40 years, and we have changed the way in which we implement our investment philosophy as well.  

For example, many investment processes that used to be time consuming and paperwork intensive can now be done electronically in a fraction of the time. Rather than making trades and tracking investments directly with mutual fund companies, most publicly traded securities can now be traded and tracked with a single custodian like Charles Schwab.  Individuals have more investment vehicles and choices than they did 40 years ago because technology has made it easier for companies to create new investment vehicles. 

These technological improvements have generally been very beneficial for investors, but they have also led to some potential pitfalls. The amount of easily accessible investment options, combined with the overwhelming financial noise coming from new sources like social media, can make focused, disciplined investing a challenge. Convenient, real-time access to market movements and investment account balances can create an impulse to focus on the short-term and make unnecessary portfolio changes. In a way, it’s more difficult than ever to maintain a long-term investment focus, but that’s what we strive to do. 

What’s Next… 

“Dear Friends, 

As we approach the election, we have found a number of people are concerned about the direction of the stock and bond markets. Our crystal ball was cracked a long time ago. We do not try to predict the short-term swings in the market. In fact, we do not believe anyone can consistently predict them. As long-term investors, we recommend a diversified portfolio of investments…with an appropriate balance and a long-term outlook, an investor can ride through the short-term market swings.” 

-Excerpt from a letter written to clients in September 1988 

With another presidential election coming up, this client letter feels especially relevant today, and displays how our timeless principles guide us in uncertain times. Many things are different now than in the 1980s, but we could send this communication to clients today and it would still be appropriate. We have the same investment philosophy now that we did back then. Elections do matter and have consequences, but we continue to believe that it is not possible to consistently predict short-term market movements. We will continue to stay diversified and focus on the long-term outlook so our clients can meet their goals.  

If you know someone who should consider using our services, please send them our way. We are happy to meet with anyone for a free, no-obligation meeting. Have them call us at 714-738-0220 to schedule a meeting, or they can click here to schedule an introductory call with one of our advisors.  

James I. Moore, CFP®