For more than four decades, I have been a professional in the investment business. Some may be surprised to find out, however, that finance wasn’t my first chosen career path.
I grew up wanting to be a marine biologist. I was so committed that I took six years’ worth of math classes and six years’ worth of science classes while in high school to prepare for college. I also attended a program at Newfound Harbor Marine Institute in the Florida Keys each summer during high school. In August 1974, I left the institute and went home for three days to pack for my first year at the University of Miami as a biology/chemistry double major.
In the middle of my freshman year, things changed. My father passed away over Christmas break. I then had to figure out how to make things work financially at one of the most expensive universities in the country. This was my first real lesson in learning how to adapt to new circumstances.
In January 1975, I attended a meeting with a broker in Miami on the topic of stock options. In the months that followed, that broker taught me how to trade options. This new skill set took my personal and professional life in a completely different direction—one I would not have been able to explore and succeed at if I had rigidly stuck to my original plan.
Times are always changing
Over the past several decades, investing and market landscapes have gone through many transformations that have required investors and investing methodologies to adapt.
For example, the 1970s introduced us to stock options, which radically changed the risk associated with buying stocks and shorting stocks (investing to benefit from a stock’s decline in price).
The 1980s brought us financial futures contracts, which changed the risk associated with investing in stock and bond indexes.
In 2005, penny pricing increments were introduced. This changed many indicators based on the stock market’s advance-decline data.
In 2007, the uptick rule affecting short sales was eliminated. This changed the way sophisticated investors were able to sell stocks short.
Sector leadership in different periods has also changed.
In the 1950s and 1960s, the “nifty 50” (which included IBM, Kodak, Xerox, and Polaroid) attracted the most attention and the most investor capital.
In the 1970s, the stock market was led by natural-resource stocks, including gold and oil.
The 1980s were led by bonds benefiting from a decline in interest rates and inflation, and also by a significant and growing interest in the stock market of Japan.
The 1990s brought the technology boom and bubble.
The 2000s were led by commodities, materials, and energy, and the 2010s ushered in the technology rally—driven by the “FAANG” companies, Facebook, Apple, Amazon, Netflix, and Google (Alphabet).
All of these changes came with different opportunities and risks. And while these changes may have seemed subtle in the short term, they grew significantly over time, requiring adjustments to investment approaches. It is not unlike the changes that take place in us as we grow older, gaining knowledge and experience along the way that leads us to make decisions differently.
What worked then may not work now
At Flexible Plan, we also understand the importance of adapting to change and new information. Since 1981, we have developed rules-based investment strategies that respond to changes in the market. These strategies were originally developed in a different time and with different information. While the methodologies of these strategies may remain the same, we have applied new information and more powerful tools to help us refine some of the data-driven rules over time. Access to more powerful computers and market data has also increased our ability to test, learn, and make more-informed decisions along the way.
We consider this type of evolutionary change—the continuous development, refinement, and maintenance of our dynamically risk-managed strategies—part of our responsibility to help you navigate the market as it continues to shift and change.
You can count on us to continue our goal of finding new and better ways to adapt to the new information and conditions that present themselves in the market. After all, questioning the status quo and aiming for something better has been part of our culture since we opened our doors almost 40 years ago.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Inherent in any investment is the potential for loss as well as profit. A list of all recommendations made within the immediately preceding twelve months is available upon written request. Please read Flexible Plan Investments’ Brochure Form ADV Part 2A carefully before investing. View full disclosures.