Phishing. It can happen to almost anyone. Phishing emails try to trick you into clicking on their fraudulent links or attachments, which can inject your computer with malware or otherwise con you into giving away credit card numbers, login credentials and similar personal information.

For example, there’s been a fake email making the rounds lately, posing as an urgent notice from Schwab, and promising the recipient a “Security Benefits Award.” All you have to do (so they say), is click on the link provided and your account will be credited.

Unfortunately, those who fall for phishing schemes are far more likely to lose money than be credited any. Sheriff Schiffer here, with three solid suggestions on how to avoid getting hooked by a phisher.

1. Don’t Click. Your first and strongest line of defense is to never click on any links or open any attachments in a phishing email. If you don’t take their bait, they won’t be able to reel you in.
2. Don’t Trust. While it’s too bad we must always be on guard, today’s online environment essentially requires it. Rest assured, if Schwab or any other reputable service provider requires follow up from you, this is NOT how they’ll go about requesting it. Be especially wary of:
   • Unsolicited emails arriving out of the blue, even if they’re supposedly from a familiar source
   • Enticing offers or scary alerts with a sense of urgency; phishers know people tend to throw caution to the wind when greed or fear takes over; they literally bank on it
   • Typos, bad grammar or generic salutations; not all phishing emails contain these, but many do
3. Do Verify. Believe me, your family, friends and professional alliances would much rather hear from you directly if anything they have supposedly sent to you seems suspicious. It’s always a good idea to be in touch by calling or sending a separate email (don’t hit “reply”), and asking the alleged sender if they really did send it.

A bonus tip: If an email smells “phishy” to you but you’re not sure either way, you should also be able to reach out to your financial advisor or a similar reputable source, asking for extra input. Here at Hill Investment Group, we’re happy to assist our clients with these sorts of questions. It’s in everyone’s best interest if we all join forces against phishers.

In our ongoing effort to clarify and simplify, we keep the financial jargon to a minimum. But even where we may succeed, you’re likely to encounter references elsewhere that can turn valuable information into mumbo-jumbo. Consider us your interpreter. Today, we’ll explore correlation, and why it matters to investing.

A Quick Take: Correlation Helps People Invest More Efficiently

Expressed as a number between –1.0 and +1.0, correlation quantifies whether, and by how much two holdings have behaved differently or alike in various markets. If we can identify holdings with weak or no expected correlation among one another, we can combine these diverse “pieces” (individual investments) into a greater “whole” (an investment portfolio), to help investors better weather the market’s many moods.

Correlation, Defined

As suggested above, correlation is more than just a quality; it’s also a quantity – a measurement – offering two important insights along a spectrum of possibilities between –1.0 and +1.0:

1. Correlation can be positive or negative, which tells us whether two correlated subjects are behaving similar to or opposite of one another.
2. Correlation can be strong or weak (or high/low), which tells us how powerful the similar or opposite behavior has been.

Correlation, Applied

Most investors are aware of the benefits of diversification, or owning many, as well as many different kinds of holdings. A well-diversified portfolio helps you invest more efficiently and effectively over time. Diversification also offers a smoother ride, which helps you better stay on course toward your personal financial goals.

But in a world of nearly infinite possibilities, how do we:

• Compare existing funds – If one fund is expected to perform a certain way according to its averages, and another fund is supposed to perform differently according to its own averages, how do you know if they’re really performing differently as expected?
• Compare new factors – What about when a researcher claims they’ve found a new factor, or source of expected returns? As this University of Chicago paper explains, “factors are being discovered almost as quickly as they can be packaged and sold to the waiting public.” How do we determine which are actually worth considering out of the hundreds proposed?
• Compare one portfolio to another – Even perfectly good factors don’t always fit well together. You want factors that are not only strong on their own, but that are expected to create the strongest possible total portfolio once they’re combined.

Correlation is the answer to these and other portfolio analysis challenges. By quantifying and comparing the behaviors and relationships found among various funds, factors and portfolios, we can better determine which combinations are expected to produce optimal outcomes over time.

Correlation, Concluded  

Heeding correlation data is a lot like having a full line-up on your favorite sports team. If each player on the roster adds a distinct, useful and well-played talent to the mix, odds are, your team will go far. Similarly, your investment portfolio is best built from a global “team” of distinct factors, or sources of returns. A winning approach combines quality components that exhibit weak or no correlation among or between them across varied, long-term market conditions.

Let us know if we can use our experience and expertise to help you build a more diversified and less correlated portfolio.

When you invest your hard-earned money, of course you hope to end up with more than when you started. Better yet, you would prefer to NOT give up returns you could have had by investing optimally.

But what is “optimal” investing? It’s not about pursuing an active investment strategy – i.e., trying to consistently pick winners, dodge losers, and accurately forecast when to be in and out of up and down markets. Nor is it about hiring an active manager who thinks they can do the same. The evidence is clear: The challenges of active investing are more likely to set you back than advance your interests.

For the past several years, Dimensional Fund Advisors has been tracking mutual fund track records in “The Mutual Fund Landscape.” If anything, the terrain keeps getting  tougher. This year’s report found that, across 15 years ending December 2017, only half of the stock funds in existence at the beginning were even around at the end, and only 14% were able to survive and outperform their Morningstar benchmarks.

The moral of the story: To run a successful marathon it’s better to pace yourself than chase the wind. Same thing for your wealth. Take the Long View®.