“Certain Uncertainty” – BDF Annual Client Event Recap

January 25, 2019

On January 17 and January 24, BDF held its Annual Client Event in Itasca and Downtown Chicago, respectively, with over 450 clients and guests in attendance. For those not able to attend, here is a recap of the event.

MyBDF App

This February, an updated version of our client portal, MyBDF, will launch along with a smartphone app. MyBDF 2.0 will have several enhancements including the capability to manually enter assets on your electronic net worth statement, a series of improvements to the document vault, and the ability to access your wealth management team directly through the app. We are excited to offer these new features and to launch the new app. Stay tuned for more communication around this app.

The Crazy 8s

It has been ten years since the end of the financial crisis. Our presentation “The Crazy 8s” took a retrospective look at 2008 through 2018 and the lessons learned from the past decade.

Not only was 2008 the worst year for the financial markets since the Great Depression era, it was a year full of memorable (or not so memorable) headlines. Lehman Brothers went bankrupt, Fannie and Freddie Mac were taken over by the U.S. government, AIG received a $150 billion bailout, unemployment hit 10%, corporate earnings plummeted, and global wealth dropped by over 40%! However, as bad as 2008 and the first two months of 2009 were, markets rebounded quickly and dramatically. For the next ten years stocks inside and outside the US generated above average returns even considering a very tough 2018 in which stocks were negative and bonds barely broke even.

In the aftermath of the financial crisis, there were many lessons learned. Here are five we believe are important:

  • Understand the nature of risk before investing. There are many different risks to consider as an investor. Some are interrelated, and some are not. Understanding these risks and knowing not to take more risk than you have the ability, willingness, or need to take is key to being a successful investor.
  • Know investment history. For example, despite recent history, the S&P 500 doesn’t always win.
  • Ignore market forecasters. They are often wrong in their prognostications.
  • Good investment strategies can sometimes have bad outcomes. Resist the temptation to chase returns.
  • Don’t look at your account too often. The more frequently you look, the more apt you are to react to movements in the market to your detriment.

Certain Uncertainty

As human beings, we don’t like uncertainty – in life or when it comes to investing. However, uncertainty exists, especially in the financial markets, and therefore, we must get comfortable with it. The presentation “Certain Uncertainty” illustrated the different ways in which we misinterpret and rationalize uncertainty and how we can more constructively understand, appreciate, and embrace that uncertainty as investors. Here are two important takeaways:

  • Coincidences are surprising occurrences of events perceived to be meaningful but that in fact have no apparent causal connection. Sometimes we give more meaning to things that are mere coincidences. We also overestimate or underestimate the frequency of occurrences based on our inherent biases or because of outside influences (the media or “conventional wisdom”). This can lead to bad investment decisions made for the wrong reasons.
  • Correlation (a connection or relationship between two things) does not equal causation (the relationship between cause and effect). We often confuse the two. These can also lead to bad investment decisions that are ill-timed or based on unrelated factors.

If you are interested in learning more about what was discussed at the event, look for upcoming webinars by our Chief Investment Officer, Mark Balasa and our Director of Investment Research, Chad Carlson.