Last week, I noted the importance of a steady personality for successful investing. There is simply no better trait than to have an unflappable mind when dealing with the often maniacal movements of the market.
Another important trait that should not be overlooked is experience. Although not a perfect navigational tool for dealing with the future, examining the past for a road map can be helpful during periods of uncertainty.
We are in the midst of one of those periods today, and for that I think it is quite valuable to turn to those who have several decades of experience for help with decisions going forward.
Some suggest that the current market and economic conditions resemble the period in the early 1970s. During that time, economic growth was sluggish, and inflation was rampant. The period gave rise to the term stagflation.
In early March, Dan Wiener of The Independent Advisor for Vanguard Investors interviewed Jim Barrow, manager of the Vanguard Selected Value Fund for insights on current situation.
Time-Tested Fund Manager
Jim is 67 years old and has seen it all. His value approach is tried and true, and his performance speaks for itself. Investors would be wise to follow his sage advice.
>
Wiener recommends Jim and his Selected Value Fund, although performance of late has been less than satisfactory. A reluctance to buy into the REIT market, a market that has been red-hot of late, has been a drag on performance.
Despite the trouble, Dan is sticking by Jim and the fund. That seems to be a wise decision.
As for the REIT market, only now are yields becoming somewhat interesting to Jim and his team. The entire real estate market was a bubble that took 10 to 15 years to create. In his opinion, the excess will take a bit longer to burn off.
These things tend to take time. Eventually real estate will be in balance again, but the bigger problem is the credit freeze caused by a reconciliation of lending institution balance sheets.
Those using leverage are now going through a process of deleveraging. That activity prevents new borrowing and creates volatility in the market. Hedge and private equity funds are scurrying to close positions, long and short.
That makes it difficult to determine values, but it makes it even more difficult to time the market. Jim says that timing should not be done at all.
Waiting for a Market Recovery
While it is easy to say I will sit back and wait for the next bull market to find its legs, actually doing so and still participating in the upside is a different story. Oftentimes, the most gains happen in the early stages of a recovery causing those sitting on the sidelines to miss the boat.
Jim is sticking by his core belief of not trying to time the market followed by broad diversification. As painful as it is to watch portfolio values drop, time will eventually cure what ails us.
Indeed, these basic tenets drive Jim and are at the core of his investment philosophy. His experience and time in the markets suggest that he will be proven right. For those looking to put that wisdom to work, I would recommend his Selected Value Fund.
Sign up today for your own 6-Month RISK-FREE subscription to The Independent Adviser for Vanguard Investors and put Dan Wiener’s Model Portfolio to work for you! In the March 2008 issue, Dan Wiener had the chance to speak with Vanguard Selected Value’s Jim Barrow and Mark Giambrone, two titans of the trade who both agree that the current crisis on Wall Street needs time to run its course. See what else they had to say with your 6-MONTH RISK-FREE Trial subscription to Dan Wiener’s The Independent Adviser for Vanguard Investors today!
