Last month, the Federal Open Market Committee raised the fed funds rate a quarter point to a range of 1.50% to 1.75%. It is the first hike this year and the sixth since 2015 when the Fed began reversing the accommodative measures implemented in the wake of 2008’s “Great Recession.” Even though bond prices decline as interest rates increase, there is a quantum of solace.
Grateful for index fund creator Jack Bogle’s contributions to everyday investing, Gordie Gorsuch, CFA, writes about effective investing on the Simple Truth blog. His calm voice of reason resonates in posts such as “Risk and Return Go Hand in Hand.”
Uncertainty is a constant in investing. Rather than hope for portfolio gymnastics to deal with unforeseen events, sensible investors rely on diversification and discipline. In so doing, they distinguish themselves from speculators and, we’d argue, not only enjoy a higher probability of success but a better quality of life, as well.
If we declared September 30th the end of 2016, the return of a typical Vista portfolio (65% stocks, 35% bonds) would be close to its long-term average of 8.8%. An average year may not sound like news until you realize how rarely it has occurred historically.