investment trends

But is it Investable?

© Can Stock Photo / gina_sanders

One of our key tasks on your behalf is the search for bargains. Seeking the best bargains is one of our fundamental investment principles.

When we spot an idea, product or trend that is likely to become more prevalent or profitable in the future, we end up trying to figure out whether that knowledge can be effectively put into client portfolios. In other words, is it investable?

To invest is to put money into something in which you have a reasonable expectation of a return. This is different than speculating, which involves a high risk of large losses or large gains. Last and least, there are many ways to simply flush money down the toilet.

For example, without debating the merits, medical and other uses of marijuana seem increasingly likely to proliferate. But we believe the political risks inherent in federal government policy are so high that it is speculating at best—not investing.

When we look at specific marijuana securities, most of the buzz is about penny stocks. These, in turn, look to us to be more in the “down the toilet” category than either an investment or a speculation. So we have concluded that the proliferation of marijuana is not investable.

Another facet of investability has to do with price. A trend that everyone seems to be talking about is likely already reflected in the price of investments, leaving little room for gains. “What everyone knows usually isn’t worth knowing,” as the saying goes.

By 1999, everyone knew the internet was going to change how we live and work. The internet did indeed transform life in many ways. But related investments were trading at extremely high valuations, resulting in losses to investors in subsequent years.

We are selective—one might say picky—about the things in which we choose to invest. Our standard of investability is high. We sometimes talk to people who are enthusiastic about an idea that sounds exciting, but is not investable. No matter how good an idea is, if we cannot get it into your portfolio on an efficient basis, it is not investable.

Clients, for examples of things we believe are investable, look at your statements (or positions in LPL AccountView). If you wish to discuss this or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

All investing, including stocks involves risk including loss of principal. No strategy assures success or protects against loss.

The Tactical Bubble

© Can Stock Photo / fullempty

Our long-time friends know that avoiding stampedes is one of our fundamental principles. We human beings know how to take things too far, history suggests. So we are always on the lookout for trends that may have become too popular.

A year or two ago, in the investment product market, “unconstrained bond managers” were all the rage. With interest rates near all-time low points and risk high, these magicians would own only the smart parts of the somewhat risky bond market. It turns out that all the money that poured into this idea would not fit into just the smart stuff.

We see a new trend today. Solicitations and information about investment concepts and products comes at us all day long, every day. Organizations would like us to send your money to them; human nature being what it is, they usually emphasize popular ideas, or ones that sound great. One term dominates these pitches nowadays.

You know we are contrarian—if everyone else likes something, we believe that alone is a reason to be cautious.

The trendy term is “tactical.” One of the dictionary definitions is “adroit in planning or maneuvering to accomplish a purpose.”

It is out of fashion to simply acknowledge (as we do) that the markets are volatile and fluctuate, an inherent feature that long term investors must face. The popular delusion is to pretend that a “tactical” manager can own stocks while they go up, then sell out to avoid the damage from the inevitable downturn.

It is a great story. Unfortunately, as a wise person noted a very long time ago, “They do not ring a bell at the top.” Is a 1% decline the first step of a 20% bear market? Or is it just the typical volatility that jerks the market around every week or month? No one ever knows.

The risk is that a small decline shakes the tactical investor out of the market, right before it turns around and makes new highs.

We have no issue in being ‘adroit in maneuvering.’ We think our work over the past couple of years shows that we are, hopefully, more adroit than ever. But it stretches credulity to believe that vast amounts of money can all be adroit at the same time.

Investors who have been fooled into believing that volatility can be sharply reduced or eliminated with no adverse effects on performance are likely to be disappointed. We are studying the potential impact if and when the “tactical” fad unwinds. Clients, if you would like to discuss this or any other matter, please email us or call.


Stock investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.