Earlier this year, Foster Group CEO, Mark Stadtlander was quoted in an article published in the Wall Street Journal. The article, titled “How to Survive a Bear Market,” centered around how investors could protect themselves from the possibility of a bear market in stocks, in light of the fact that the current bull market is now more than six years old.
Mark recounted some of the frustration he felt in back in 1994 when the actively-managed investment strategy Foster Group used at the time was producing dismal results for clients. After much soul-searching, we changed our approach to one that did not rely on predicting the direction of markets. Instead, it relied on the strength and resilience of capital markets around the world, and on the principle of broad diversification as the investor’s best friend – treating markets as your ally rather than your adversary. That change has made all the difference, for our clients, and for Foster Group.
Study after study has shown that investors’ results are significantly worse when they attempt to change their portfolio in response to, or in anticipation of, changes in markets. Professor Terrance O’Dean, chairman of the finance group at the Berkeley Haas School of Management, also quoted in the article, summed it up this way: “The less you tinker with the details, the less opportunity you have to screw them up.” We agree!
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