Think Different

Is it different this time?

Source: The Missing Bite

Sir John Templeton once said that the four most dangerous words in investing are, “This time it’s different.” There’s a lot of truth in this. When people assert that things have changed, often they are just trying to rationalize an extreme position. So during the dot-com or housing bubbles some folks said, “It’s different this time” to justify sky-high valuations. Employees at Enron who participated in that company’s 401(k) plan had invested almost 60% of their assets, on average, in Enron stock, saying “Enron’s different.” Oops.

It’s always true that diversification reduces risk and that prices have to be based on fundamentals like cash-flow earnings, and income. But it’s also true that we live in a dynamic, adaptive global economy where technology and new businesses are disrupting old ways of doing things. It’s never different this time, but it’s always different this time. That’s why markets rise, over the long run.

Source: Jeremy Seigel, Financial Analysts Journal, 48:1

The key is knowing what has changed. Bywords and catch-phrases won’t help you save for retirement or pay for your child’s college education. We don’t know the future. But we do know that it will probably be better than the past.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By |2017-07-17T12:23:07-04:00January 9th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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