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Investment Principles of Fisher Investments
Below is an introduction to investment principles of Fisher Investments. Note, these are not meant to provide investment advice, but rather to introduce the values we hold paramount.
- Capital Markets Efficiency: At Fisher Investments, we believe the stock market is an efficient discounter of all widely-known information.
- Simply Supply and Demand: Security prices are set solely by supply and demand of securities.
- Asset Allocation Is the Most Important Decision: In its simplest form, Fisher Investments believes asset allocation is the decision to hold stocks, bonds, or cash—and in what percentages—in a portfolio.
- The Four Market Conditions: The market can do only one of four things on a forward-looking basis: It can be up-a-lot, up-a-little, down-a-little, or down-a-lot. Typically, equity investors should veer from stocks only in anticipation of the down-a-lot scenario.
- The Importance of Benchmarking: In portfolio management, an investing benchmark is normally a market index, a blend of indexes, or some other performance goal.
- Capital Markets Technology: Capital markets technology is the practical application of knowing what others don’t.
- It’s Time in the Market, Not Timing the Market That Counts: History shows stock markets superior returns are concentrated, and annual return can come from just a few days of big moves—but it’s impossible to know which days they will be.
- Average Returns Aren’t Normal. Normal Returns Are Extreme: Fisher Investments has learned that yearly market returns rarely meet long-term market averages. Rather, they are most often extreme.
- Bear Market Basics: Unlike bull market corrections, bull market tops don’t generally have dramatic, sharp crests and sudden steep drops—they tend to roll over slowly.
- Behavioral Finance: Our Brains Aren’t Wired for This! At Fisher Investments, we understand behavioral finance posits that the brain’s evolutionary traits, developed to survive prehistoric threats, consistently handicap investors in modern-day investing.
- Bonds Are Risky Too: Bonds experience near-term price volatility (like stocks), exposing investors to reinvestment and interest rate risks, and over long time periods, almost never beat stocks.
- The Risk of Geopolitical Conflict and Terrorism: International military conflicts and terrorism simply don’t have the long-term market impact many investors fear.
- Trade Deficits Don’t Matter for Major Developed Countries: Many people fear America’s big trade deficit, believing it’s a drag on economic performance. If this were true, surplus nations would routinely outperform deficit nations, but it isn’t so.
- Don’t Fear Heights: During a bull market’s run, many investors fear stocks hitting new highs, believing the market’s "height" increases risk. However, stocks hit new highs, and move still higher, frequently.
- Global Investing Can Be Better Investing: At Fisher Investments, we believe a broad, global investing benchmark can increase performance opportunities and help manage overall risk.
- Globalization Is Vital: Globalization is the growing economic interconnection between economies of all kinds, promoting more efficient allocation of resources and providing a net benefit to the global economy.
- High Fees Hinder Net Return: High fees, such as those associated with many mutual funds and annuities, create performance headwinds and can reduce annual net return.
- Never Say Dow: The Dow Jones Industrial Average, though widely used and recognized, is a narrow, 30-stock price-weighted index. It is therefore not an indicator of the entire market and shouldn’t be used as a benchmark.
- Political Risk Aversion: At Fisher Investments, we’ve learned stock markets abhor the risk of redistribution of wealth and/or property rights that frequently follows new legislation.
- Relative Currency Strength Doesn’t Dictate Stock Market Direction: Historically, there hasn’t been a meaningful correlation between the dollar’s relative strength and stock market direction.
- Seasonality is a Myth: In general, market forecasting relying on capturing seasonal or other short-term swings falls apart under statistical analysis and is grounded only in confirmation bias and illusion of validity.
- An Optimal Debt Level for Countries Is NOT Zero: Many investors fear government debt, believing economic performance would improve if a nation had little or no debt. But basic economics and history teaches this isn’t so.
- Stocks Almost Always Beat Bonds, and Usually by a Significant Margin: Fisher Investments research reveals over 20-, and 30-year rolling periods, stocks almost always beat bonds by a significant margin.
- Stocks Aren’t Serially Correlated: Numerous studies have shown that past price movement cannot predict future price movement—stock prices aren’t serially correlated. In other words, any backward-looking price pattern isn’t reliably instructive when forecasting future prices.
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