As an investor, you are likely familiar with the concept of owning a balanced portfolio. However, one strategy that has been well-documented over time to outperform a perfectly balanced portfolio is a “value tilt.”

A value tilt approach to investing is a strategy that involves overweighting companies with a lower price-to-earnings (P/E) ratio than the overall market. The rationale behind this strategy is that these undervalued stocks have the potential to deliver higher returns in the long run as the market corrects its mispricing…

One of the most challenging aspects of long-term investing is that years of growth can be wiped out in days or weeks. While every stock market cycle is different, over the past 100 years, it generally has looked something like this -

Small incremental growth followed by a few small waves of panic resulting in declines of 5-10% each year, a few shocks of 20-30% every decade, and a complete meltdown every few decades. It can be tempting to try to avoid the big shocks or meltdowns because the reward for doing so is large. But what if you are wrong and what you think is a meltdown is only a shock, or what you think is a shock is only a small panic? What is the cost?

I was recently listening to a podcast hosted by a few advisors who are also popular in financial media. One of them had recently been brought on by several media outlets to talk about one of their predictions for 2023.

As a way of establishing credibility, the media outlets cited one of his 2022 predictions that he got right – the S&P will have its worst year since 2008. Financial news outlets had subject lines that read something to extent of “this analyst who forecasted market downturn in 2022, now says...”

Last month Warren Buffett published his annual letter, which as usual had timeless pieces of wisdom in it. Below are a few of my favorites.  

#1 - Focus on dividends and earnings during market downturns. In 1994 they bought $1.4M of Coca-Cola. Last year that stock paid them dividends of over $700M…

Raising a 5-year-old has taught me a lot about setting expectations. A few nights ago, I gave him a 5-minute warning before bedtime. When I told him it was time, he jokingly stood up straight, saluted me, said “yes sir” and marched upstairs to brush his teeth. I’ve learned this “warning” technique after many failed attempts that involved me interrupting him in the middle of a game to send him to bed with no warning. When I do this, he is completely caught off guard and his reaction shows. The time he goes to bed is the same in either scenario. The only difference is whether his expectations were met.

Let me try to convince you that the same is true in the short-run for the stock market.