Managing SLA's Investments
by Richard Geiger
The financial markets, along with the economy in general, have been in the top news all year. I wanted to take the opportunity to let you know how SLA's investments have been fairing, and how we can reasonably expect them to perform in the future.
SLA has a conservatively managed, well-balanced, and diversified portfolio. This conservative approach to our long-term investing has benefitted the Association, especially in times of market volatility. While this approach does limit our exposure to risk, it does not eliminate it entirely.
We have seen the total value of our portfolio drop along with the markets in recent months, the first drop in quite some time. It is important to note that this expected in the market, and is not cause for concern.
The increasing globalization of the world's economy and the speed at which information now travels have made investors scrutinize the markets much more closely. For long-term investors, like SLA, increased scrutiny of their portfolios is not always wise. Research done at the University of Chicago suggests that an investor's aversion to risk increases the more often they check their portfolio. In addition, investors are up to 50% more sensitive to losses than they are to gains.
Not only have we all been paying closer attention to the markets, but the past decade has spoiled many investors. As the following graph demonstrates, investors were much more likely to experience returns of greater than 20% and much less likely to experience a loss during the '90s.
SLA recognizes that the '90s were not typical and is not basing its future investing success on the abnormally high returns of the last ten years. Our conservative investment approach ensures that we adhere to our stated investment policy of achieving the maximum possible rate of return on investments, while preserving the principal amount of all invested assets.
For more information,
contact Richard Geiger, SLA Treasurer
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