One year in: Im doubling down on investment discipline

Since assuming the role of Global CIO here at Russell Investments one year ago, I have been met by one inescapable truth again and again: Discipline matters!

I’m not referring to the breed of hard-line discipline that brings dogmatic or inflexible thinking. I mean the sort of investment discipline that recognizes and weighs the tensions between emotions and facts. As investors, this brand of discipline helps us know our part and how to play it.

In the investment realm, discipline means keeping the goal in mind, especially when everything around us would suggest otherwise. During the past year, we have seen everything from abrazen Russian invasion to an abrupt Bill Gross exodus from PIMCO. Each such geopolitical or industry event tempts investors to react rather than act.

At every turn, investors need to ask themselves: What is it I have in mind? Do I want to just chase the market impact of today’s headlines? Am I so smitten with the latest ”sexy” investment product or do I care more about outcome-oriented goals such as a comfortable income during retirement, or a pension plan that can meet its liabilities over the next two decades? Over the last year, I’ve seen plenty of evidence that our clients who stick to a disciplined strategic asset allocation often help themselves achieve their chosen outcome.

In my role, I face these forks in the road constantly. React, or act?  An outcome-oriented discipline helps us make decisions for how we allocate assets, manager assignments and market exposures.

I’ve made it a priority to share our vision of investing discipline within the Russell team as well as with our investors and the marketplace. Granted, sometimes investors will say, “Oh, this is just marketing.” Not entirely! Our strategic beliefs get embedded in our portfolios so that during difficult times, we remain grounded in our philosophy which was decided beforehand and not in the emotion of the market. These beliefs are the underpinnings for the daily debates and decisions that are built into our investment process.

During this past year, I have seen firsthand why investors can find the world an unsettling place. I have seen investors fearful about conflicts in the Middle East, or doubtful about gradually improving employment data in the U.S. I have seen mounting skepticism about the U.S. Federal Reserve’s quantitative easing and Ben Bernanke’s proclaimed goal of increasing investor wealth: People don’t want to invest in a manipulated market. These sorts of risks are a constant in a complex, connected world.

A disciplined process with strong quantitative underpinnings has allowed our strategists to currently advocate a slight preference for equities throughout 2014, despite an unsettled world and the equity market’s strong run during the past few years. You can learn more about their latest views in our newly published Global Outlook.

Against this reality, we believe that any quest for the newest, hottest investment product is more about entertainment than outcomes.Instead, we believe that an outcome-driven plan and a multi-asset approach can help investors practice disciplined goal-setting when coupled with flexible, opportunistic investment execution.

Let’s check back in another year and see how we’re doing.

© Russell Investments

© Russell Investments

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