YOUR QUARTERLY VIDEO REVIEW
Hear our thoughts on the previous quarter & your financial life.
Our 2021 Q1 Quarterly Client Update video, sent to our clients to accompany quarterly statements. Please contact your Triune Financial Planner with questions!
Quarterly Video - Q1 2021
Patience is A (Financial) Virtue
Spring Greetings! We are pleased to share this quarters video newsletter with you as we enjoy warmer weather and longer days of sunlight, after one of the coldest winters on record in decades here in Kansas City.
In our January video we covered, in depth, the crazy and historic stock market volatility of 2020. We emphasized the true reward of being a patient investor. Those who stayed the course in 2020, and did not abandon a long-term intentional strategy – even in the midst of a temporary bear market - were rewarded with a market recovery for the record books. A recovery that continues to show well into the first quarter of this year. Another blog post, and yet again here we are preaching about patience - albeit this time from a different perspective. In our 2020 newsletters, we discussed the performance of our investment strategy relative to current market conditions and preached patience. We want to show you how that patience has been rewarded over the last six months.
But first – a quick recap of the Triune Investment Strategy:
Our strategy is based on unbiased, academic research dating back to 1926.
This research identifies specific dimensions of the market that have higher expected returns over time. Those market dimensions are small companies and value companies - We refer to this as the small and value “premiums”.
These premiums are intentionally over-weighted in the equity portion of your portfolio; emphasizing the small and value premiums maximizes the odds of success for long-term investors. However, the premiums do not deliver higher returns during all market cycles and periods. In recent years, we have seen small companies underperform large companies, and value companies underperform growth companies - but there has been a swift and strong turnaround in the past six months.
According to a recent study, that tracks the rolling 3-year returns of value stocks and growth stocks during two similar periods. From July 1996 through January 2000 (3 ½ half years) - Value stocks underperformed growth stocks. However, from that point, value stocks went on a run of outperformance that also lasted 3 ½ years.
We have just come through a strikingly similar pattern of value stock underperformance. That underperformance ended in July 2020, and the rolling 3-year performance of value stocks has exceeded growth stocks over the past six months. Of course, we do not yet know how the next three years will play out but the important take-aways are:
Periods of underperformance have happened in the past, and still the long-term research continues to show that a value premium does exist.
As much as we would love to see a period of underperformance before it hits, so we could pivot to avoid it, we simply cannot. Therefore, the only way to benefit from the long-term advantage of value stocks, is to say invested and remain patient.
Here is the relative performance of value and growth stocks for the last 6-months ending, February
28, 2021:
Value Stocks (Fama/French US Value Research Index) +44.44%
Growth Stocks (Fama/French US Growth Research Index) +18.36%
Value stocks have outperformed by 26.%.
*Small stocks were hit especially hard in the market reaction to COVID in 2020 declining more than large stocks. The recovery in small stocks took longer to begin but the recovery has been very strong.
Here is the performance of small and large stocks for the six months ending, February 28, 2021:
Small Stocks (Dimensional US Small Cap Index) +50.74%
Large Stocks (S&P 500 Index) +17.63%
Small stocks have outperformed by 33%.
Patience with the strategy is paying off. So, we are a broken record after all! But we cannot emphasize it enough - patience is one of the cornerstones of a successful, long-term investment strategy.
You may recall that in one of our earliest meetings with you as a new client, we discussed the Triune Investment Philosophy. The very first thing we covered in that presentation was a quote from Warren Buffett “Capital markets have a very efficient way of taking money from impatient investors and giving it to the patient ones.”
Patience is a virtue – in life and in investing.
Thank you for the trust and confidence you have placed in Triune. We are very grateful for it.
Disclosures: Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients. Member SIPC. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against loss in a declining market. Investing involves risks including potential loss of principal and fluctuating value. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. This content is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services. Triune Financial Partners, LLC is an investment advisor registered with the Securities and Exchange Commission.