THE PURSUIT Alternative OF ALPHA
Investments: Diversify Your Holdings
By Missy Janes for Middleburg Life
The term “alpha” has a lengthy Investopedia definition. In short, “alpha” is the excess return over an investment’s benchmark index return. aimportfolios for “alpha”. We see aInvestors lot of outside that Therefore, almostinall investment are solely invested Large-Cap U.S. Equities and advisors feelcan’t that help they but get shudder paid to at the “alpha”. risk. It’s especially common to chase
see right now because U.S. markets
have investors out-performed nonFew havedeveloped the necessary U.S. and emerging markets the combination of ability, time,over capital last few years. Despite this short-term and over toanremember investment view, control it’s important two to create “alpha”. Regardless of things: experience, most investors have 1) International provide these goals in stocks mind:help ability to live diversification benefits. onvaluable their portfolio’s income, saving 2) Recent performance is not a reliable forindicator a child’sofeducation or their own future returns. retirement and making sure their investments are first-rate. The global equity market is huge and nearly half of its investment oppor-
Most investors share theofchallenge tunities are comprised non-U.S. of capturing “return” of the stocks. To put the things in perspective, that’s more than 10,000 capital markets, as companies opposed in to over 40 countries that own a sole-U.S. stock generating their “alpha.” portfolio is missing out on. That’s a lot Problem is, most investors never of lost opportunity if you choose to capture the market’s entire return. avoid the global market. They don’t get the investment’s full If we narrow thethe focus to the “lost dereturn, rather investor’s return. cade”—the years 2000-2009, where the What’s the difference? S&P recorded it’s worst ever 10-year
performance—circumstances were Carl Richards, a writer quoted in not the so bad forrags, globalcalls equity If financial thisinvestors. difference we broaden our view and look at the “the gap.” yearsbehavior starting in 1900Unfortunately, and ending in emotions can prohibit sound 2010, the U.S. market outperformed investment decisions and investors the world market in five decades and underperformed in the other six. This buy and sell when they shouldn’t. does not mean going out and plopping your assets in a random country’s company stock. The difference between the best and worst performing stock is noteworthy: the average best was 37.5 percent and the average worst was minus-15.7 percent. Again, diversify.
For years I’ve been advocating By exposing yourstop portfolio to both U.S. that investors trying to catch and non-U.S. equities, you achieve di“alpha”. I encourage investors to versification benefits as well as potensettle in andexpected rely on returns an empirical tially higher in the approach, on speculation, long run. not Youbased may also sound more intelligent at dinner partiesscience if you hapbut on the irrefutable of pen to discuss investments and throw capital markets. Investing in a in a comment about how Hungary’s globally diversified, tax ofand cost markets have had one heck a year. efficient portfolio will prevail. –Tom Wiseman
Keep Your Money
WISEMAN & ASSOCIATES WEALTH MANAGEMENT Artwork by Cathy Zimmerman
PART TWO ealthy woodlands and hedgerows flanked by wildflower meadows and thickets with areas of tall grass nourish healthy and connected eco-systems. When properly managed, maintenance costs are reduced and native habitat is enriched. Good soils are vital to the prosperity of all plant life. To promote natural soil processes and the beneficial organisms, develop a land management plan that utilizes cover crops, green manure, compost, and soil development strategies. The complex mix of decomposed material recycled from leaves, plants and compost develops into a nutritious organic layer of humus from which all else in the landscape emerges. Allow tall native grasses and wildflowers to flourish by maximizing diverse native plantings. Keep mowing to essential areas. Let old fields revert to a meadow. Birds and wind disperse the seeds. Butterflies pollinate. You will save on bush- hogging costs. Control invasive plants as the meadow evolves. Diverse meadows offer food, shelter and nest sites. Cut once or twice a year but not between April 1 and August 1 when birds are nesting and raising young. Riparian corridors or stream-side vegetation is a complex plant community which filters water and traps sediment. The result is cleaner, purer water quality. Encourage native woody shrubs along streams, ponds and wetlands. The riparian growth shades the stream, cooling the water, which benefits the growth of healthy water insects. Resist mowing too close to this vegetative zone. A shrub buffer also discourages flocks of Canada geese from becoming year round residents. Plant a riparian buffer by seeking assistance from local soil and water conservation professionals. A width of 50 feet is desirable. Seedling trees and some shrubs are available for a nominal fee from county soil and water conservation districts. Hedgerows define edges of properties and save spaces for young trees to mature and distinguish themselves. They provide byways for wildlife. When replacing a fence, leave the old hedgerows and add a wider margin where possible. In the woodlands, air is cooled and cleaned. Water is absorbed and filtered. Healthy layers of bio-diverse relationships contribute to future life in the country. The lives of birds are closely linked with the lives of trees and many birds need large areas of forest to breed successfully.
Dead trees provide perches, nesting sites, bug havens, food sources and hiding places for birds and small creatures. Build brush piles, install and maintain nest boxes. Consider linking your wooded and wild areas so they connect to a neighboring property. Habitat and wildlife corridors should flow across the countryside and across boundary lines. To maintain healthier animals and cleaner water supplies, fence out livestock from open water. Hold back mowing to stabilize banks, filter run off and keep water temperatures cooler. Mow patterns to follow the bend in a stream or a topographical line. This adds movement and visual appeal. On the topic of stream monitoring for water quality, Save Our Streams developed a system to measure “Green roofs and track changdecrease the total es in the streams amount of runoff by that affect the retaining up to 75% watershed. Louof rainwater gradudoun Watershed ally releasing it back Watch lists orinto the atmosphere ganizations that via condensation train volunteers and transpiration.” as stream moni- Norfolk tors to collect Botanical Garden stream data and compile records. Volunteers learn to identify macro-invertebrates and their sensitivity to pollutants and gauge water quality. Water quality can be impaired by erosion, development, road and parking lot surfaces, pesticides and herbicides, improper disposal of toxic substances and some agricultural practices. To learn more about this program contact: http:// www.goosecreek.org/. Rain gardens are designed to catch water, slow it down and filter the runoff. Successful plantings include versatile plant selections that can survive both dry and wet conditions. Their roots hold the soil; the soil filters the water; and the blossoms provide nectar for pollinators. Pollutants from impervious surfaces are captured from the first rush of water and runoff is reduced. Green roofs insulate from the hot summer sun and the cold winter winds while absorbing water and minimizing runoff from heavy rains. A roof garden can withstand severe conditions from drought to heavy rain. The plant textures add interest while absorbing water and making oxygen. This is an excerpt from Missy Janes’ book, Life in the Country. A long-time Middleburg resident, she’s a writer and photographer whose work regularly appears in Middleburg Life. MIDDLEBURG LIFE