March Madness is in full swing. Perennial blue-bloods like Arizona, UNC, Michigan State, and Virginia were expected to go deep in this year’s tournament. These teams are laden with NBA caliber talent and it’s possible several of their players will be lottery picks in the upcoming draft. It’s not surprising most people picked these schools to win their office bracket. In fact, more than a quarter of the brackets picked Virginia to win it all this year.
Entering this year’s tournament, a 1 seed has never lost to a 16 seed. The 1 seeds have compiled a first-round record of 135-0! That was until this year when The University of Maryland Baltimore County destroyed Virginia 74-54.
The Retrievers put on quite the show, adding a punctuation mark to this year’s madness. Led by 5’-8” point guard, K.J. Maura, the team kept Virginia at bay for most of the game. They played as a unit and didn’t rely on a star player or a McDonald’s All-American. They were just a bunch of determined young men playing extremely efficient basketball.
The mascot for the school is the Chesapeake Bay Retriever. According to the American Kennel Club, “Chessies take to training, but they have a mind of their own and can tenaciously pursue their own path. They are protective of their humans and polite, but not overtly friendly, to strangers. Chessies make excellent watchdogs and are versatile athletes.” This definition can also be applied to their men’s basketball team.
Investors are always on the hunt for one stock or fund they can buy to propel their portfolio to new heights. In doing so, they ignore the efficiency and power of a diversified portfolio. A balanced portfolio will deliver solid results without relying on a star stock or fund. In other words, you don’t need to be on the lookout for a 1 seed to win the investment game.
A balanced portfolio of five exchange traded funds (ETF’s) generated an average annual return of 7.7% for 10 years from February 2008 to February 2018. An initial investment of $50,000 is now worth $105,000. This efficient portfolio doubled in value despite falling 24% during the Great Recession.
A low-cost, index portfolio shuns the star money manager model to provide market driven returns for shareholders. A benchmark hugging portfolio is an excellent way to grow your wealth. Active fund managers and high-flying stock pickers despise the index model because of their market producing returns. However, 93% of large-cap active fund managers failed to beat their benchmark on a 15-year basis. Most active money managers also failed to beat their benchmark on a 1, 3, 5, and 10-year period.
It’s also wise to work with an advisor who will act as your coach. A fee-only, fiduciary financial planner can help guide you by developing a game plan based on your hopes and dreams. In addition, a reputable planner will be with you during good times and bad.
As you build your winning team focus on a diversified portfolio of low cost investments and work with a fee-only, fiduciary advisor who’s a Certified Financial Planner practitioner.
Do you believe in miracles? Yes! ~ Al Michaels.
Truly I tell you, if you have faith as small as a mustard seed, you can say to this mountain, 'Move from here to there,' and it will move. Nothing will be impossible for you. ~ Matthew 17:20
Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX. For more information please visit www.parrottwealth.com.
March 20, 2018
Note: Past performance is not a guarantee of future returns. Your returns may differ than those posted in this blog and investments aren’t guaranteed.
 The five funds are IVV, IJR, EFA, BND & VNQ held from 2/29/2008 to 2/28/2018. Each fund started with $10,000 and the portfolio was rebalanced annually.
 https://www.spglobal.com/our-insights/SPIVA-US-Scorecard-Mid-Year-2017.html, Aye Soe and Ryan Poirier, 9/21/17.