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Early in my career, I worked for an investment firm that had a memorable slogan: “When E.F Hutton talks, people listen.” John Houseman, an actor perhaps best remembered for having portrayed the sagacious Harvard law professor in “The Paper Chase”, delivered this catchy phrase for years on television ads. Believe it or not, at that time when I mentioned who I worked for, people would often stop the conversation, cup their ear, and “listen” to my observations on the markets. Looking back now I must admit that my experience and views as a young investment advisor surely were not worthy enough to quiet the room. Why? I had not yet developed enough perspective on the markets. And if there is one thing that helps investors achieve better financial outcomes, perspective could arguably be at the top of the list. And patience. But let’s talk about perspective and how you might want to think about the subject.

On Wall Street, we often see perspective that is shaped by one’s investment offerings. What do I mean by this? Here are three examples from three marketing emails I received today.

The first email was from the largest U.S. private equity firm touting “the rise of private credit”. Private equity (and private credit) used to be reserved for the largest and most sophisticated investors. In recent years, we have seen more and more opportunities for average investors to “get in on” private equity. You might call this the democratization of private equity. Not surprisingly, recent results have proven once again that riskier, less liquid investments can deliver poor performance too.

A second email from a very large New York City based investment bank publicized an upcoming webinar titled “Perspective on the Municipal Landscape”. The webinar will showcase the capabilities of the investment firm and explain why “now is the time” to invest in tax free bonds. To be honest, I am not sure why “now is the time” as tax-free bonds have been in a decline for about two years. Are they trying to “call the top” in interest rates? Personally, I like and own tax-free bonds. But these investments are long term oriented and best utilized for specific investors. Timing interest rates is NOT a sustainable long term investment strategy.

The last email was from a very widely known mutual fund research organization who shall remain nameless. They invited me to attend a mutual fund presentation entitled “Mind the Gap”. The “gap” being referred to is the difference between average investor returns and the average return of the market. In case you are not aware, the average return of the market exceeds the average return of most mutual fund investors. How does this happen? Very simply, investors pour money into mutual funds when markets are up and pull money out during downturns. This poor behavior leads to lower returns. Knowing of this behavior, and investing with better perspective, may improve returns. You noticed I did not say “will lead” to improved returns. That’s perspective talking (and compliance reviewing my blogs). Let’s applaud the research company for revisiting this often overlooked reality. Painful truths are not the easiest subjects to discuss.

Every day I see views and opinions shaped by the perspectives of different investment firms. Some are worthy and others worth very little. Having the wisdom to recognize the worthy from the worthless is based on experience, diligence, and objectivity. That defines a very useful perspective, in my humble opinion.

Ralph McDevittAugust 18, 2023

Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC

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