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October 12, 2023 at 03:58 PM
When it comes to portfolio investments, the Israel-Hamas war is “business as usual. In terms of life, absolutely not. But I don’t want my emotions to impact investing,” Allan Roth, founder of Wealth Logic, tells ThinkAdvisor in an interview.
The fee-only advisor is making no changes to clients’ asset allocations because the horrifying attacks by Hamas are already priced into the market.
“If you’re going to change your asset allocation, you’ve got to know something the rest of the market doesn’t know,” Roth says.
Instead, he argues that advisors and their clients should “stay the course.” A longtime John Bogle aficionado, Roth was gearing up to attend the Bogleheads Conference near Washington, D.C., the day after this interview.
His clients are ultra-high-net-worth individuals sophisticated in their investing. But if they don’t stick to their investment policy statements, he lays a guilt trip on them for “breaking their contract with their own money.”
Before opening his own RIA in 2003, the 25-year veteran of the financial arena held high-level positions at large corporations, including Kaiser Permanente and Exxon.
ThinkAdvisor interviewed Roth on Oct. 11. He was speaking from his office in Colorado Springs, Colorado.
Within the context of the war discussion, he talks about what he calls “true diversification.”
“That’s not picking anything to overweight or underweight,” he stresses.
Here are highlights of our interview:
THINKADVISOR: What are your initial thoughts about the Israel-Hamas war in relation to your clients’ investment portfolios?
ALLAN ROTH: It’s so shocking. What a failure in intelligence. I’m just heartbroken and angry. But I don’t want to let my emotions impact investing.
What should financial advisors be telling their clients?
Stay the course. The only reason to make a change to outsmart the market is that they know something the rest of the market doesn’t already know.
Otherwise, you’re following the herd, and that usually doesn’t end well.
If I make a decision now, because of what’s going on in Israel or the war in Ukraine, to get out of all international stocks, I’ve sold stocks that have underperformed. That’s performance chasing.
Are you changing any investments at all because of the Israel-Hamas war?
I’m changing absolutely nothing in my portfolio and my clients’ portfolios because I don’t know anything that the market doesn’t already know that’s not likely priced into the market.
The Tel Aviv Stock Exchange [index] hasn’t budged much.
Have your clients been asking you about their portfolios in view of what’s happening in Israel?
Absolutely not. My average client knows more about investing than, I’d say, at least 90% of investment advisors.
[Further], we don’t invest in any particular country other than the U.S. but in a [Total International Stock Index Fund], which obviously is going to have some Israeli shares; it used to have Russian shares but doesn‘t any longer.
Do you think many investors have been panicking and selling based on emotion?
I’m sure they have. But when the market didn’t go down, they probably stopped panicking.
The Monday after the [Saturday Hamas attack on Israel], it started down and then ended positive.
The headlines that morning said: “Stocks down due to Israeli war.” Later that day when stocks were up, the headline was: “Stocks rebound.”
We can’t explain why investments do what they did in the past — and certainly not in the future.
Do you think people have been rushing to buy defense and energy stocks and commodities?
