As you are all aware, last year was a challenging time to be an investor. Bonds had their worst year in recorded history with a -13% return. More speculative assets such as high-growth stocks, crypto assets — and almost any asset that spiked dramatically during the pandemic — reversed course and saw much larger declines. It was a good reminder that things tend to revert to the mean, and while the basic laws of investing might get out of whack from time to time, core principles like rewarding earnings and cash flows, diversification, cost management, etc., persist over longer periods of time.

Staying the Course by Following Our Core Investment Philosophies

I’m pleased to report that despite 2022’s challenges and those during the pandemic in general, we did not deviate from our core investment beliefs:

  1. Markets Are Efficient
  2. Cost Matters
  3. Diversify Globally
  4. Markets Reward Discipline
  5. Optimism Triumphs

This still resulted in less-than-ideal returns for the year, but relative to the broader market and many of the more speculative assets, we feel like we managed things well on behalf of our clients. And we believe that we’re set up for good long-term results going forward. We also “made lemonade out of lemons” by harvesting tax losses and repositioning investments into lower cost and more efficient investments for our clients. I don’t believe we have ever worked harder at Flagstone than we did in the 4th quarter of ’22 as our team made investment changes and identified numerous tax planning opportunities for our clients.

In addition to the investment and tax planning efforts last year, we implemented new trading processes, became beta testers for new trading software being implemented by LPL, and improved our tax planning process, including better utilizing existing software and upgrading some of the analytical tools we use to assist our clients.

Preparing for Growth

Over the past year we have made several steps to allow for continued growth at Flagstone. Those of you that have met Amy Auch Moedy in our office will interact with her in a different role as she is moving from Associate Wealth Advisor to a newly created position titled Client Relationship & Development Associate. Because she is such a great ambassador for Flagstone and is so personable, we wanted to reposition her to best use her talents. We look forward to having her interact with prospective clients and walk alongside new clients during their first year at Flagstone to make sure their experience with Flagstone is second to none. She will also be connecting with existing clients and others in the community to share the good work we are doing at Flagstone.

We have also updated our careers page at Flagstone. As we continue to grow in a steady manner, getting the right people at Flagstone is one of our most important missions. We are going to be very selective about who we hire, but if you have someone you think would be an amazing team member, please direct them to our careers page. We are particularly looking for those with unquestionable ethics, a service-minded heart, and advanced degrees and designations such as the CFP®, CPA, and J.D.

Family Ties

On a personal note, I’m excited that my son Sam is interning at Flagstone starting in 2023. He is a sophomore studying finance at UNL. Sam is a young entrepreneur and loves maximizing opportunities — something he honed during the pandemic by being a reseller of goods, namely game consoles and collectibles. With Sam joining Flagstone, we will have three generations of my family working at Flagstone (my mom Bev has been here since the start). Flagstone is far beyond a family business, but I’m thrilled nonetheless to share the journey with my family.

Opportunities Ahead

As we think about 2023, we are excited for the year ahead. There are still many unknowns in the market: the Fed continuing to raise short-term interest rates, inflation still at elevated levels, and several geopolitical concerns. However, we have seen improvement on the inflation front, valuations look more attractive, and the starting yield to maturities on bonds is the best it has been in over a decade. These signals make it more likely we’ll see better returns in bonds going forward than we have seen in the last several years. The stock market is a little less predictable, but we continue to believe in capitalism and publicly traded businesses growing their earnings over time.

Along with managing investments, we are privileged to walk along with you in all the opportunities and trials you face in your lives. We are in a blessed spot to be able to share in your excitement, advancement, windfalls, and experiences as well as be a source of support in life’s more challenging moments. Please call us when you need us or whenever you are making big decisions . . . it is where we can add the most value, which we love doing. In the meantime, we’ll continue the routine blocking and tackling of investing and financial planning that is essential to long-term financial success.

One area (and opportunity) where we see a big difference in the value we can provide clients is when we are allowed to coordinate tax, estate planning, insurance, banking, etc., with your other professionals. Often our clients want to handle those areas on their own or perhaps other professionals aren’t open to collaboration, but I see a huge difference in the overall advice for clients when the professionals are collaborative and clients are open to that collaboration. If you don’t feel like your professionals are properly coordinating advice for your benefit, we should have a discussion on how we can make that better.

We value the investment management, financial planning, and coordination work we do for you. Growth is one of our core values as a firm, and in this context, it means we will continue to work hard, grow our knowledge, grow our talents, and utilize the newest and best technology in ways that can add value to our clients’ lives. We look forward to continuing to work and grow together in 2023 and beyond. Thanks so much for your relationship!

Flagstone Financial Management is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

Photo by Ben Weber on Unsplash