Today’s Video: Doing Better with Global Diversification

By | May 4th, 2018|General|

Over long periods of time, investors can benefit from consistent exposure in their portfolios to both U.S. and non-U.S. equities – large and small; value and growth. Check out this short video with Dimensional’s Joel Hefner explaining how diversifying globally and emphasizing the dimensions of higher expected returns can improve the chances of having a successful investment experience.

This is why Park + Elm is focused on designing globally diversified portfolios, minimizing investment costs and keeping our client’s risk tolerance at the forefront of our investment philosophy. Check out the examples in the video…

Quarterly Market Review – 1st Quarter 2018

By | April 5th, 2018|General|

Q1 18

Click on the link below for a detailed analysis of quarterly performance of the global equity and fixed income markets.


Today’s Clip: Things you CAN control in your Investment Portfolio

By | February 27th, 2018|DFA, Dimensional Fund Advisors, General, Markets, Video|

There are periods of good and bad in the stock market, but it is by far the BEST investment option we have. Understanding that the price of a stock is driven to fair value by the intense competition of companies and investors, allows us to focus on CONTROLLING what we can: RISK, FEES AND DIVERSIFICATION.

Click on the video image below to watch this short clip about focusing on the controllable things, and the importance of working with an advisor that understands you.


The Stock Market Sell Off…Will it Continue?

By | February 6th, 2018|General|

Side view of businessman using laptop with abstract business charts and diagrams on wooden desktop. Toned image

The U.S. stock market sell-off continued Monday with the Dow Jones Industrial Average suffering its biggest one-day point drop in history, plunging 1,175 points. The market gave back its 2018 gains as a flash-crash-style drop intensified a free fall in stocks that began last week. That leaves many investors worried and wondering what to do. Our firm is watching this situation very closely for our clients.

Why is this happening?
The stock market is still in midst of a 9-year bull market.  The S&P 500 spent the last 200+ days within 3% of all-time highs with no correction and gained over 22% in 2017.  Since President Trump was elected in November 2016, the DJIA has gained 45%, through its record closing high on January 26, 2018.

It’s important to remember that stocks will not go up forever.  Markets go up and down and this may be our wakeup call after 14 moths of gains. Most analysts consider this drop to be a normal correction, as opposed to a sign of a bear market. Many market watchers remained baffled about what prompted the sell-off since there was no major economic news or earnings reports from major companies on Monday.

Possible Factors in Sell-off

  1. Increase in interest rates – The 10-year Treasury bond yield rose to 2.85% on Monday, from 2.40% at the end of 2017.  Rising rates can put pressure on stocks.
  2. Inflation – There is a fear of spiking inflation, which can give cause for possible future rate increases.  Wage increases, while good for the economy, can also attribute to an inflationary environment.
  3. Bitcoin – The virtual currency has fallen from a high of $20,000 to less than $7,000.  This does not correlate directly with stocks, but can create an environment of negative sentiment for investors that have lost money in this asset class.
  4. HFT – Some of the late selling on Monday can be attributed to HFT (high frequency trading).  HFT is an automated trading platform used by large investment banks, hedge funds and institutional investors which utilize powerful computers to transact a large number of orders at high speeds.  These computers using algorithms to put in sell order.  Many orders hitting at once can magnify a sell-off.

Why the Bull Market May Continue 

While the sell-off can create some worry among investors, we want to shift the focus to the positives in the overall economy:

  • Corporate earnings and revenue growth are high
  • Low unemployment
  • Growing economy
  • Wage growth
  • Tax Reform and lower corporate tax rates

What to do?
Most likely, no action is needed.  Focus on why you are investing and your long-term goals.  We will work with our clients to make sure the current asset allocation (stocks verse bonds/cash) meets their risk tolerance.  Rebalance your portfolio when needed to bring back into alignment with the long-term plan.  Keep investment costs low and stay diversified. 

Our firm keeps the above principles at the forefront of our investment philosophy so our clients will be positioned well in volatile times.

Warren Buffett had this to say about a falling stock market…

“Don’t watch the market closely,” he advised those worried about their retirement savings. “If they’re trying to buy and sell stocks, and worry when they go down a little bit … and think they should maybe sell them when they go up, they’re not going to have very good results.  As long as you are invested appropriately for your goals, stay away from your investment portfolio.”

If you have any questions on your specific situation, please feel free to contact our office.

As Goes January, So Goes the Year?

By | January 30th, 2018|General|

As investors ring in the new year, some may see the occasional headline about the “January Indicator” or “January Barometer”.
This theory suggests that the price movement of the S&P 500 during the month of January may signal whether that index will rise or fall during the remainder of the year. In other words, if the return of the S&P 500 in January is negative, this would supposedly foreshadow a fall for the stock market for the remainder of the year, and vice versa if returns in January are positive.

So have past Januarys’ S&P 500 returns been a reliable indicator for what the rest of the year has in store?

If returns in January are negative, should investors sell stocks?

Exhibit 1. January Return vs. Subsequent 11-Month Return of the S&P 500 Index; 1926-2017


Exhibit 1 shows the monthly returns of the S&P 500 Index for each January since 1926, compared to the subsequent 11-month return (i.e., the return from February through December). A negative return in January was followed by a positive 11-month return about 60% of the time, with an average return during those 11 months of around 7%.

This data suggests there may be an opportunity cost for abandoning equity markets after a disappointing January. Take 2016, for example: The return of the S&P 500 during the first two weeks was the worst on record for that period, at -7.93%. Even with positive returns toward the end of the month, the S&P 500 returned -4.96% in January 2016, the ninth-worst January return observed from 1926 to 2017. But a subsequent rebound of 18% from February to December resulted in a total calendar year return of almost 13%. An investor reacting to January’s performance by selling out of stocks would have missed out on the gains experienced by investors who stuck with equities for the whole year. This is a good example of the potential negative outcomes that can result from following investment recommendations based on an “indicator.”

Over the long term, the financial markets have rewarded investors. People expect a positive return on the capital they supply, and historically, the equity and bond markets have provided meaningful growth of wealth. As investors prepare for 2018 and what the year may bring, we should remember that frequent changes to an investment strategy can hurt performance. Rather than trying to beat the market based on hunches, headlines, or indicators, investors who remain disciplined can let markets work for them over time.

Quarterly and Annual Market Review for Q4-2017

By | January 8th, 2018|General, Markets, Quarterly Market Review|

News concept: circuit board with Growth Graph icon, 3d render

Click on the link below for a detailed analysis of quarterly and annual performance of the global equity and fixed income markets.


To Bit or Not to Bit: What Should Investors Make of Bitcoin Mania?

By | December 22nd, 2017|General|

Depressed businessman leaning head below bad stock market chart in office

Bitcoin and other cryptocurrencies are receiving intense media coverage, prompting many investors to wonder whether these new types of electronic money deserve a place in their portfolios.

Cryptocurrencies such as bitcoin emerged only in the past decade. Unlike traditional money, no paper notes or metal coins are involved. No central bank issues the currency, and no regulator or nation state stands behind it.

Instead, cryptocurrencies are a form of code made by computers and stored in a digital wallet. In the case of bitcoin, there is a finite supply of 21 million,[1] of which more than 16 million are in circulation.[2] Transactions are recorded on a public ledger called blockchain.

People can earn bitcoins in several ways, including buying them using traditional fiat currencies[3] or by “mining” them – receiving newly created bitcoins for the service of using powerful computers to compile recent transactions into new blocks of the transaction chain through solving a highly complex mathematical puzzle.

For much of the past decade, cryptocurrencies were the preserve of digital enthusiasts and people who believe the age of fiat currencies is coming to an end. This niche appeal is reflected in their market value. For example, at a market value of $16,000 per bitcoin,[4] the total value of bitcoin in circulation is less than one tenth of 1% of the aggregate value of global stocks and bonds. Despite this, the sharp rise in the market value of bitcoins over the past weeks and months have contributed to intense media attention.

What are investors to make of all this media attention? What place, if any, should bitcoin play in a diversified portfolio? Recently, the value of bitcoin has risen sharply, but that is the past. What about its future value?

You can approach these questions in several ways. A good place to begin is by examining the roles that stocks, bonds, and cash play in your portfolio.


Companies often seek external sources of capital to finance projects they believe will generate profits in the future. When a company issues stock, it offers investors a residual claim on its future profits. When a company issues a bond, it offers investors a promised stream of future cash flows, including the repayment of principal when the bond matures. The price of a stock or bond reflects the return investors demand to exchange their cash today for an uncertain but greater amount of expected cash in the future. One important role these securities play in a portfolio is to provide positive expected returns by allowing investors to share in the future profits earned by corporations globally. By investing in stocks and bonds today, you expect to grow your wealth and enable greater consumption tomorrow.

Government bonds often provide a more certain repayment of promised cash flows than corporate bonds. Thus, besides the potential for providing positive expected returns, another reason to hold government bonds is to reduce the uncertainty of future wealth. And inflation-linked government bonds reduce the uncertainty of future inflation-adjusted wealth.

Holding cash does not provide an expected stream of future cash flow. One US dollar in your wallet today does not entitle you to more dollars in the future. The same logic applies to holding other fiat currencies – and holding bitcoins in a digital wallet. So we should not expect a positive return from holding cash in one or more currencies unless we can predict when one currency will appreciate or depreciate relative to others.

The academic literature overwhelmingly suggests that short-term currency movements are unpredictable, implying there is no reliable and systematic way to earn a positive return just by holding cash, regardless of its currency. So why should investors hold cash in one or more currencies? One reason is because it provides a store of value that can be used to manage near-term known expenditures in those currencies.

With this framework in mind, it might be argued that holding bitcoins is like holding cash; it can be used to pay for some goods and services. However, most goods and services are not priced in bitcoins.

A lot of volatility has occurred in the exchange rates between bitcoins and traditional currencies. That volatility implies uncertainty, even in the near term, in the amount of future goods and services your bitcoins can purchase. This uncertainty, combined with possibly high transaction costs to convert bitcoins into usable currency, suggests that the cryptocurrency currently falls short as a store of value to manage near-term known expenses. Of course, that may change in the future if it becomes common practice to pay for all goods and services using bitcoins.

If bitcoin is not currently practical as a substitute for cash, should we expect its value to appreciate?


The price of a bitcoin is tied to supply and demand. Although the supply of bitcoins is slowly rising, it may reach an upper limit, which might imply limited future supply. The future supply of cryptocurrencies, however, may be very flexible as new types are developed and innovation in technology makes many cryptocurrencies close substitutes for one another, implying the quantity of future supply might be unlimited.

Regarding future demand for bitcoins, there is a non-zero probability[5] that nothing will come of it (no future demand) and a non-zero probability that it will be widely adopted (high future demand).

Future regulation adds to this uncertainty. While recent media attention has ensured bitcoin is more widely discussed today than in years past, it is still largely unused by most financial institutions. It has also been the subject of scrutiny by regulators. For example, in a note to investors in 2014, the US Securities and Exchange Commission warned that any new investment appearing to be exciting and cutting-edge has the potential to give rise to fraud and false “guarantees” of high investment returns.[6] Other entities around the world have issued similar warnings. It is unclear what impact future laws and regulations may have on bitcoin’s future supply and demand (or even its existence). This uncertainty is common with young investments.

All of these factors suggest that future supply and demand are highly uncertain. But the probabilities of high or low future supply or demand are an input in the price of bitcoins today. That price is fair, in that investors willingly transact at that price. One investor does not have an unfair advantage over another in determining if the true probability of future demand will be different from what is reflected in bitcoin’s price today.


So, should we expect the value of bitcoins to appreciate? Maybe. But just as with traditional currencies, there is no reliable way to predict by how much and when that appreciation will occur. We know, however, that we should not expect to receive more bitcoins in the future just by holding one bitcoin today. They don’t entitle holders to an expected stream of future bitcoins, and they don’t entitle the holder to a residual claim on the future profits of global corporations.

None of this is to deny the exciting potential of the underlying blockchain technology that enables the trading of bitcoins. It is an open, distributed ledger that can record transactions efficiently and in a verifiable and permanent way, which has significant implications for banking and other industries, although these effects may take some years to emerge.

When it comes to designing a portfolio, a good place to begin is with one’s goals. This approach, combined with an understanding of the characteristics of each eligible security type, provides a good framework to decide which securities deserve a place in a portfolio. For the securities that make the cut, their weight in the total market of all investable securities provides a baseline for deciding how much of a portfolio should be allocated to that security.

Unlike stocks or corporate bonds, it is not clear that bitcoins offer investors positive expected returns. Unlike government bonds, they don’t provide clarity about future wealth. And, unlike holding cash in fiat currencies, they don’t provide the means to plan for a wide range of near-term known expenditures. Because bitcoin does not help achieve these investment goals, we believe that it does not warrant a place in a portfolio designed to meet one or more of such goals.

If, however, one has a goal not contemplated herein, and you believe bitcoin is well suited to meet that goal, keep in mind the final piece of our asset allocation framework: What percentage of all eligible investments do the value of all bitcoins represent? When compared to global stocks, bonds, and traditional currency, their market value is tiny. So, if for some reason an investor decides bitcoins are a good investment, we believe their weight in a well-diversified portfolio should generally be tiny.

Source: Dimensional Fund Advisors LP.

The opinions expressed are those of the author and are subject to change. The commentary above pertains to bitcoin cryptocurrency. Certain bitcoin offerings may be considered a security and may have different attributes than those described in this paper. Dimensional does not offer bitcoin.

This material is not to be construed as investment advice or a recommendation to buy or sell any security or currency. Investing involves risks including possible loss of principal. Stocks are subject to market fluctuation and other risks. Bonds are subject to increased risk of loss of principal during periods of rising interest rates and other risks. There is no assurance that any investment strategy will be successful. Diversification does not assure a profit or protect against loss.

Because bitcoin is being sold in some quarters as a paradigm shift in financial markets, this does not mean investors should rush to include it in their portfolios. When digesting the latest article on bitcoin, keep in mind that a goals-based approach based on stocks, bonds, and traditional currencies, as well as sensible and robust dimensions of expected returns, has been helping investors effectively pursue their goals for decades.

[1]. Source:

[2]. As of December 14, 2017. Source:

[3]. A currency declared by a government to be legal tender.

[4]. Per Bloomberg, the end-of-day market value of a bitcoin exceeded $16,000 USD for the first time on December 7, 2017.

[5]. Describes an outcome that is possible (or not impossible) to occur.

[6]. Investor Alert: Bitcoin and Other Virtual Currency-Related Investments, SEC, 7 May 2014.

[7]. Investors should discuss the risks and other attributes of any security or currency with their advisor prior to making any investment.

Home Bias and Global Diversification

By | December 14th, 2017|General|

By pursuing a globally diversified approach to investing, one doesn’t have to attempt to pick winners to achieve a rewarding investment experience.

Every day we enjoy the benefits of an interconnected world. We might start our day with a cup of coffee that originated in South America, check our email on a smartphone designed in California and manufactured in Taiwan, then shower and change into clothes woven from Egyptian fabrics before driving a German-made car or riding in a French-built train to work.

As consumers, we rarely think twice about the benefits of access to the cornucopia of goods the global market has to offer. Yet, as investors, we will often concentrate our portfolios in favor of our home market at the expense of global diversification. For example, while US stock markets represent just over 50% of the value of global equity markets, many US investors tend to allocate around 70% of their equity assets to domestic stocks.[1] This phenomenon, which can be observed across countries around the world, is known in the investment community as home-country bias.

Given that certain frictions may be associated with investing abroad, a home-country bias may make sense for an investor in certain cases. For example, for tax-deferred investors in the US, foreign dividend tax withholdings may present a disadvantageous tax drag on international investments. In general, however, neglecting the benefits that global diversification has to offer may increase risks and decrease the investment opportunity set.

As Exhibit 1 illustrates, 13 different developed countries (out of 21) had the best-performing equity market in a given calendar year for the 20 years ended in December 2016, and no country had the best-performing market for more than two consecutive years.

Exhibit 1: Equity Returns of Developed Markets

Annual Return (%)

 news img

In US dollars.

Source: MSCI developed markets country indices (net dividends). MSCI data © MSCI 2017, all rights reserved. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

This trend was also observable in emerging markets. As Exhibit 2 illustrates, 13 different emerging market countries (out of 20) had the best-performing market in a given year, and no country had the best-performing market in consecutive years.

Exhibit 2: Equity Returns of Emerging Markets

Annual Return (%)


In US dollars.

Source: MSCI emerging markets country indices (gross dividends). MSCI data © MSCI 2017, all rights reserved. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

This data shows that it is difficult to know which markets will outperform from year to year. By holding a globally diversified portfolio, investors are instead well positioned to capture returns wherever they occur.

Due to the recent positive performance of international stocks, investors today may be less worried about a global approach to investing than they may have been in the past. Over the last several years, however, strong performance in the US equity markets has led some market participants to question the value of holding a globally diversified portfolio. In different market environments, and as sentiments about global diversification and its value ebb and flow, it is helpful to remember that history has not shown any one market around the world to be a consistent outperformer.

Clearly, attempting to pick only winning markets in any given period is a challenging proposition. By pursuing a globally diversified approach to investing, one doesn’t have to attempt to pick winners to achieve a rewarding investment experience. By expanding the investment opportunity set beyond their domestic stock market, investors can help increase the reliability of outcomes. Thus, investors can be confident that a globally diversified portfolio will hold the best (and worst) performing countries each year.

Source: Dimensional Fund Advisors LP.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.

There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision.

All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Pursuing A Better Investment Experience – EBOOK – is Here!

By | December 1st, 2017|General|

Our First Ebook – Pursuing a Better Investment Experience – is finally here! We are inviting you, our clients and friends, to be the first to view it! Download it for FREE. It is your guide to a simple, free way of thinking about investing in capital markets!



ten practical steps to investing


Key Questions for the Long-term Investor

By | November 15th, 2017|General|


Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions may be intimidating, but know that you’re not alone. Your financial advisor is here to help.  While this is not intended to be an exhaustive list it will hopefully shed light on a few key principles that may help improve investors’ odds of investment success in the long run.

1.  What sort of competition do I face as an investor?

The market is an effective, information-processing machine. Millions of market participants buy and sell securities every day and the real-time information they bring helps set prices.

This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers (see question 2 for more on this). This is good news for investors though. Rather than basing an investment strategy on trying to find securities that are priced incorrectly, investors can instead rely on the information in market prices to help build their portfolios (see question 5 for more on this).

2.  What are my chances of picking an investment fund that survives and outperforms?

Flip a coin and your odds of getting heads or tails are 50/50. Historically, the odds of selecting an investment fund that was still around 15 years later are about the same. Regarding outperformance, the odds are worse. The market’s pricing power works against fund managers who try to outperform through stock picking or market timing. One needn’t look further than real-world results to see this. Based on research, only 17% of US equity mutual funds and 18% of fixed income funds have survived and outperformed their benchmarks over the past 15 years.

3.  If I choose a fund because of strong past performance, does that mean it will do well in the future?
Some investors select mutual funds based on past returns. However, research shows that most funds in the top quartile (25%) of previous five-year returns did not maintain a top-quartile ranking in the following year. In other words, past performance offers little insight into a fund’s future returns.

4.  Do I have to outsmart the market to be a successful investor?

Financial markets have rewarded long-term investors. People expect a positive return on the capital they invest, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation. Instead of fighting markets, let them work for you.

5.  Is there a better way to build a portfolio?
Academic research has identified equity and fixed income dimensions, which point to differences in expected returns among securities. Instead of attempting to outguess market prices, investors can instead pursue higher expected returns by structuring their portfolio around dimensions of expected returns like company size, price, profitability and risk.

6.  Is international investing for me?
Diversification helps reduce risks that have no expected return, but diversifying only within your home market may not be enough. Instead, global diversification can broaden your investment opportunity set. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

7.  Will making frequent changes to my portfolio help me achieve investment success?
It’s tough, if not impossible, to know which market segments will outperform from period to period.

Accordingly, it’s better to avoid market timing calls and other unnecessary changes that can be costly. Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results.

8.  Should I make changes to my portfolio based on what I’m hearing in the news?

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. If headlines are unsettling, consider the source and try to maintain a long-term perspective.

9.  So, what should I be doing?
Work closely with a financial advisor who can offer expertise and guidance to help you focus on actions that add value. Focusing on what you can control can lead to a better investment experience.

  • Create an investment plan to fit your needs and risk tolerance.
  • Structure a portfolio along the dimensions of expected returns.
  • Diversify globally.
  • Manage expenses, turnover, and taxes.
  • Stay disciplined through market dips and swings.

Contact us Park + Elm today to get started on your long-term plan at 855.PARKELM or

Past performance is no guarantee of future results.

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