Why You Need an Investment Philosophy

Eagle Wealth Management |


Some believe that in a digital world where information travels at light speeds, the playing field between investors and institutions is more level.  In reality, information overload can fuel more irrational behavior in investors than provide any advantage. Without a strong investment philosophy guiding decisions and helping focus one’s goals; it’s easy to be influenced by herd mentality which may do more harm than good.

The same can be said for tech-driven investment models.  These can create an overreliance on AI-generated portfolios that may lull investors into complacency.  These models attempt to hypothesize future returns based on calculations that suggest future uncertainties.  

But remember, it’s impossible to predict the market.  AI-generated portfolios also assume that people will always act rationally and without emotion, which has been disproven.  By sticking to your investment philosophy, you’re less likely to be persuaded by computer-generated models or other investors.
Long-term investors stay laser-focused on their philosophy because they recognize that media noise impacts short-term outcomes and investment models don’t reflect reality.  One of the world’s most successful investors, Warren Buffet, ignores the noise because he knows it doesn’t matter.  In building one of the most successful investment portfolios of all time, he has strictly held to his own investment philosophy:

“Buy wonderful businesses at a fair price with the intention of holding them forever.”

An investment philosophy doesn’t have to be intricate or involved.  In fact, conciseness is seen as an indication of stronger conviction.Your investment philosophy is like a framework for your investment strategy.  It should include clearly defined objectives and be specific to your own life circumstances. Here’s an example of a philosophy statement that encapsulates a long-term strategy:

  • Diversify broadly
  • Keep the structure of the portfolio aligned with your goals
  • Stay invested

When developing your investment philosophy, try to have a clear understanding of your own objectives, core beliefs about money, and risk tolerance to build confidence in your investment philosophy.  Keep in mind that you don’t need to develop your philosophy on your own.  We’re here as your financial partners and happy to discuss any questions you may have. 

Your Eagle Wealth Team


The Week on Wall Street

Investors rode a rollercoaster of emotions as rising hostilities at the Russian-Ukrainian border sent stocks sharply lower before a powerful late-week rally erased early losses.

The Dow Jones Industrial Average was flat (-0.06%), while the Standard & Poor’s 500 edged higher by 0.82%. The Nasdaq Composite index gained 1.08% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost an eye-catching 5.72%.1,2,3

Geopolitical Events

The build-up to Russia’s eventual invasion of Ukraine triggered elevated market volatility, resulting in broad-based selling that sent the S&P 500 into correction territory as the holiday-shortened week of trading began.4

The sell-off culminated on Thursday morning following the overnight incursion of Russian troops into Ukrainian territory, though markets staged a powerful late-day recovery that coincided with President Biden’s announcing fresh sanctions against Russia. The afternoon rebound was remarkable, as the S&P 500 ended 1.5% higher after being down more than 2.6%, while the Nasdaq Composite closed 3.3% higher after dropping nearly 3.5% intraday. Thursday afternoon’s momentum continued into Friday as stocks rallied to end the week in positive territory.5

Invasion Implications

Setting aside the more important aspects of the human cost and damage to world order, Russia’s invasion of Ukraine introduced an acute layer of uncertainty into many layers of the financial markets. The immediate repercussion was the impact on global economic recovery due to rising energy prices, which reduce consumers’ discretionary spending and saddle businesses with higher costs.

The inflationary impact of higher energy and other prices, along with the prospect of decelerating economic growth, also complicates the Fed’s strategy to guide interest rates higher. Already, the probability of a 50 basis point interest rate hike at the Fed’s March 2022 meeting seems less likely than it was just a week ago. Finally, Russia’s actions have raised new concerns over second-order effects that could further unsettle markets, such as a new round of supply-chain disruptions.


Key Economic Data

Tuesday: ISM (Institute for Supply Management) Manufacturing Index.
Wednesday: ADP (Automated Data Processing) Employment Report.
Thursday: Factory Orders. Jobless Claims. ISM (Institute for Supply Management) Services Index.
Friday: Employment Situation.

Source: Econoday, February 25, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

Companies Reporting Earnings

Monday:  Lucid Group, Inc. (LCID), Zoom Video Communications, Inc. (ZM).
Tuesday: Salesforce.com, Inc. (CRM), Target Corporation (TGT), Ross Stores, Inc. (ROST).
Wednesday:    Dollar Tree, Inc. (DLTR), Snowflake, Inc. (SNOW).
Thursday:  Broadcom, Inc. (AVGO), Costco Wholesale Corporation (COST), Best Buy Co., Inc. (BBY), Marvell Technology, Inc. (MRVL), The Kroger Company (KR).

Source: Zacks, February 25, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.