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2016 Q4 Newsletter

A Perfectly Normal Year

2016 is being called “The Year of the Unexpected” due, in part, to the following:

  • US equities declined more during the first six weeks of 2016 than they had in any other first six weeks of any calendar year in history.
  • The United Kingdom made a Declaration of Economic Independence from the European Union via a historic Brexit referendum, sending the global markets into a summer freefall.
  • After bottoming near all-time lows in July, 10-year Treasury bond yields skyrocketed to almost 2.5% by year-end.
  • The Cubs won the World Series for the first time since 1908.
  • The price of oil nearly doubled from just above $25 per barrel in January to near $50 by year-end.
  • In what was likely the least anticipated presidential election outcome in US history, a billionaire who had never run for political office won the US presidential election, sending the Dow Jones futures tumbling over 800 points on election night.

It is with full disclosure and complete honesty that I admit we did not predict any of these events, primarily because we made no attempt to do so. Rather, as in every year since our inception eighteen years ago, we simply followed DEM’s Four Pillars of a Successful Investment Experience:

Chart the Course. We analyze our clients’ income, expenses, assets, liabilities, taxes, charitable giving, college savings, asset protection, and estate plans. We then construct and implement lifelong financial plans designed to achieve their goals by addressing not only current issues, but those likely to surface throughout their lifetimes, and beyond.

Invest Intelligently. We prudently invest our clients’ hard earned capital using low-cost, tax-efficient, globally diversified portfolios of the World’s Best Companies managed by the Nobel Prize winners at Dimensional Fund Advisors. (If you have not already done so, please visit their very informative new website at

Diversify Broadly. We build truly diversified portfolios with exposure to multiple assets classes, securities, countries, and investment styles to ensure we deliver global equity market returns. As the markets fluctuate, we periodically re-balance our positions back in line with our target weightings by reducing exposure to positions that have performed well and increasing exposure to those that have not.

Ignore the Noise. We rigidly adhere to our disciplined approach regardless of economic circumstances, political events, natural disasters, or the inevitable market fluctuations that accompany them. As we pointed out in last month’s Client Corner, Panic Is Forbidden at DEM.

So how did our common-sense investment philosophy and disciplined approach fare in “The Year of the Unexpected”? Ironically, after all of the short-term fluctuations, our equity portfolios finished the year with a gain almost exactly in line with their long-term historical average. Despite the numerous unprecedented events that occurred, in aggregate 2016 turned out to be a perfectly normal year. We would be wise to remember this as the inevitable surprises of 2017 begin to unfold over the coming months. As Oscar Wilde said, “To expect the unexpected shows a thoroughly modern intellect.”

A few year-end administrative notes:

  • Introducing our new DEM Dashboard client portals earlier this year has turned out to be the most successful service enhancement we have ever implemented. If you have not already taken the time to familiarize yourself with the many features that are now available to you through your portal, please click on each of the following links, then call us to discuss:

    Life in a Box
    DEM Dashboard
  • I would like to thank all who participated in our first-ever DEM client survey earlier this year. Your feedback was not only overwhelmingly positive, but invaluable as we continue our quest to be the best independent advisory firm in the galaxy (Rogue One reference intended!). You will be receiving the next installment of our survey during the first quarter of 2017 and we would once again appreciate another few minutes of your time to offer some feedback.
  • Although we have not achieved top status in the galaxy (yet!), we were recently notified that DEM has been selected as one of Jacksonville’s Top Wealth Managers for the fourth consecutive year. Heartfelt thanks to each and every one of you for making this possible!
  • With our continued growth, we find ourselves inching closer and closer to our ideal number of clients. We would like nothing better than to fill our remaining roster with new clients exactly like our existing ones. That said, if you have family members, friends, or colleagues who you feel would benefit from our services, please make them aware of our No-Cost, No-Obligation, Second Opinion Service. Upon an introduction from you, we will assess their entire financial situation, produce the framework of a comprehensive financial plan, and analyze their current portfolio completely free of charge. Even if we happen to not be a good fit, I assure you they will emerge from the experience wiser and better prepared to make sound financial decisions.

Here’s to a wonderful 2017!

Don Davey
Senior Portfolio Manager
Disciplined Equity Management
Plan Appropriately, Invest Intelligently, Diversify Broadly, Ignore the Noise

2016 Q4 Market Index Returns

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