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The Revenge of the Nerds




 By Bob Payne, Managing Director and Chief Investment Officer (CIO)

I’ve decided to call this month’s market update, “The Revenge of the Nerds.” If you recall that 1980s movie, it was about a rivalry between the nerds who had tape wrapped around their glasses and the cool kids, who were basically the jocks, frat boys and popular guys on campus. That’s actually not dissimilar to what I see on Wall Street these days, where the cool kids are the “smart money” guys, speculators, traders and gurus on the “financial pornography” channels.While the nerds are people like us at Payne Capital Management (PCM), who invest in the market for a purpose, use history as a guide and focus on evidence portfolios.

Three Keys:

Speculators try to make money off the short-term movements of the market

Smart investors focus on long-term growth through diversified portfolios

Over any 10-year rolling period, a balanced portfolio has always made money

Here’s an example: In mid-April, important financial ministers met on a Sunday in Qatar to discuss the oil industry, but they couldn’t come to any kind of agreement. So almost immediately that night, futures and the oil market went down 5 or 6 percent, and the smart money started “shorting” oil. That means you sell something before you buy it back. But by 9:40 a.m. the next day, shortly after the opening bell, oil not only didn’t keep going down, it actually went up almost 3 percent.

So the smart money guys who thought it would be an easy trade were in there buying back their shorts at a big loss. That’s what speculators do – they try to make money off the short-term movements of the market. It’s gambling. And we don’t believe in speculation at PCM. Do you know what we believe in? Following evidence portfolios. The evidence shows that over any 10-year rolling period, a balanced portfolio like we invest in is never at a loss. It has always made money.

There have been more than 900 rolling periods since 1926 where if you took a balanced portfolio, the performance proved net-positive. That’s how we believe people should invest. And the key to this strategy is diversification. So when you look at the market, are you a speculator or an investor? We think history provides the best guide and you should stay fully invested at all times in a diversified portfolio.

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 Payne Capital Management, LLC), or any non-investment related content, made reference to directly or indirectly in this blog 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 blog serves as the receipt of, or as a substitute for, personalized investment advice from Payne Capital Management, LLC. 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. Payne Capital Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Payne Capital Management, LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.