Humility, in a word, has been the greatest lesson Art Rothschild has learned in more than 20 years of advising investors.
In his latest monthly feature for the Racine Journal Times, Art says it is a concept he has witnessed and strived for throughout his career as vice president at Landaas & Company.
“Being ‘humble’ in your approach to investing – or having ‘humility’ – implies that even though you think you know what is happening in the economy and the markets, you should never put all your eggs in one basket,” Art writes. “It is as simple as that. And that is why having balanced portfolios, holding both stocks and bonds, is important even when we think that one or the other asset class has more potential. Have an opinion, but don’t bet the ranch on it!”
An advantage of experience is working through cycles – and aberrations – in the economy and business activity and investment markets, and with humility, you can recognize that patterns don’t always play out as expected, Art says.
To read Art’s article in its entirety and for an archive of his earlier “Investment Insights,” please click here.
For instance: “As economic times improve and concerns about inflation typically increase, interest rates normally rise and bond values normally fall,” Art writes. “The bond market lately has been anything but normal. Those who have bet the ranch on rising interest rates and declining bond values have been wrong. Interest rates have actually gone down and bond values have continued to rise. This once again demonstrates the importance of humility. Just because we expect something to happen in a certain way, does not mean that it will.”
Especially as commotion stirs over the latest sensations from Capitol Hill or Greece or the Federal Reserve, remaining humble provides some blinders from the sorts of distractions that can cloud investment decisions.
“In these troubling times, we could all use a dose of humility,” Art writes. “As investors, I will suggest that it is important not to let all of the noise confuse us.”
initially posted June 24, 2011