Tag: government action | McMill CPAs & Advisors

Jared Faltys

Specializes in financial planning, business tax planning, investment advisory services

It’s hard, and often counterproductive to comment about breaking news while it’s still moving through the proverbial grinder … which is why we usually don’t do so. However, we feel it’s worth commenting on the current banking situation and how it affects long term results.

Our Broad Advice Remains the Same
As you know, we typically seek to optimize your personal long-term outcomes by recommending against reacting to near-term upsets. This philosophy is based on academic principles about how to improve your odds for investment success over time. As such, our strategy expects that the unexpected WILL happen now and then.

Silicon Valley Bank
Following the collapse of Silicon Valley Bank (SIVB), it’s understandable that you may feel anxious, but when a bank or any other company falters, your investment plan shouldn’t.

This week, we have been considering a saying attributed to Nobel laureate Harry Markowitz that diversification is the only free lunch in investing. Incorporating core investment principles like global diversification into your investment plan can give you respite from concerns about the fate of individual companies.

What do these regional banks account for in a typical portfolio…..
An investor with a broadly diversified global equity and bond allocation can have exposure to thousands of companies, issuers in dozens of industries, and countries around the world. For instance, as of February 28, SIVB was just one of more than 9,000 companies in the MSCI All Country World IMI Index (MSCI ACWI IMI) and represented a mere 0.03% of the index.¹ As of the same date, regional banks in total represented only 1.15% of the index, with the largest at 0.10%.²

Global diversification may not make headlines, but it shows that exposure to one name, one area is extremely limited.

You and Your Money
During times of heightened risk, the longing to take hurried action becomes a pull that’s often too strong to overcome on your own. Media headlines and market volatility can make us question our long term strategies. Just a reminder that we need to “block out this noise” and times like this can potentially create opportunities.

Call us at 402-371-1160 with any questions as we walk through this together.

¹The MSCI All Country World IMI Index is a broad market-capitalization-weighted index of public companies across developed and emerging markets globally. As of February 28, 2023, the MSCI All Country World IMI Index included 9,010 companies. MSCI data © 2023, all rights reserved. Silicon Valley Bank weight represented by its parent company SVB Financial Group.

²Regional banks weight reflects the weight of the “Regional Banks” GICS Sub-Industry as of February 28, 2023, as defined prior to March 17, 2023. GICS was developed by and is the exclusive property of MSCI and S&P Dow Jones Indices LLC, a division of S&P Global.

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. All expressions of opinion are subject to change. This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions.