Wall Street Journal… One of the greatest difficulties in maintaining investment discipline is media coverage. This week’s article said, “An unusual calm has descended over the stock market,” and “volatility is near its lowest levels in history.” This is followed by “investors are rushing into risky investments.” The article ends with “If anything, investors should embrace today’s environment.” What is an investor to do?

Another article states “Stocks are at or near an all — time high” and “Only four times in history have stocks been higher.” This means nothing. It would be much more helpful to say how much lower the market is than where it could reasonably be expected to be.

In May 2000, the NASDAQ was at 5,000. It dropped to 1,200. In March 2009 it began to recover. It returned to 5,000 in March 2015. After 15 years it had returned to its previous high. Is that a good investment?

That depends on how you define a good investment. Had you bought the index fund in 2000 and reinvested dividends and kept investing, you did well. But what if you had selected the best performers in the index? Apple, Amazon, and Google’s parent Alphabet returned 30% to 35% annually. They would have increased your investment 30 times.

There is evidence that one or two stocks each year return 100%. If you can find one and keep it for three years, you are likely to double your investment. Our goal is to find these companies before they appear in the press. Fortunately, our strategy is more focused on quality and valuation than hype.

Sincerely,

Katz Family Financial