Traverse City Record-Eagle

Business

June 8, 2014

Jason Tank: Investors should guard against getting entranced

(Continued)

Some people, and the press, are starting to question why any sane person would waste time studying a company in order to assess its inherent value. Analysis is passé. Automation is in. You’ve probably seen the currently-accepted version of a modern-day investment portfolio. It’s that one with the very colorful looking pie-chart broken up into about eight slices of various market “exposures” that automatically rebalance themselves every so often.

This supposedly “proper” portfolio is increasingly constructed with index funds that contain absolutely no human thought or monitoring. With these portfolios, the financial industry’s implicit message is to just have faith. After all, Nobel laureates say it works. Heck, even Warren Buffett now agrees. With those heavyweight bookends in place, one can feel that sense of complacency setting in just a little deeper.

Oh, if only successful investing was this easy! My message to those who can feel the trance’s slow grip, I want to give you a tool to help you snap out of it. Ask yourself these important questions when you next review your own portfolio. What am I actually invested in and what’s it really worth? These simple, non-rhetorical, time-tested questions have always pointed the way for successful investors. That much has not changed and never will.

Jason P. Tank, CFA is co-founder of Front Street Wealth Management, an independent, fee-only, fully-discretionary wealth advisory firm for individuals, families and trusts.

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