The Tide is Coming
Warren Buffett, one of the greatest investors of all time, cracked a joke once about taking on too much risk: “It’s not until the tide crashes in that you find out who is swimming naked”! Isn’t that the truth? Chuckling aside, the reality is that we have had 8 long years of market growth. The secular bull market was exceptional, increasing the S&P 500 index by 335% from March 9, 2009 to mid-January 2017. Reality Check: we are NOT in a dream world. “What goes up, must come down”.
Now, do we know if it will be this year? Or next? No one has a crystal ball, and I’m not foolish enough to predict what may occur and when. But inevitably, the economy cannot expand forever, and eventually the tide will turn. How are you positioned in order to shelter yourself from what’s coming? And if you could actually make money instead of lose it, would you want to know how to do so? Here are three recommendations:
Work With the Right Advisor
Make sure you’re working with an advisor who has your best interests at heart. Wall Street and its brokers make money off of fear and greed. They can place you in a cookie-cutter portfolio just because you said you were “moderate” or “conservative”—but that means different things to different people! You see, if your accounts go down too much (or don’t go up enough), you’ll be tempted to sell and go into other holdings or funds. Cha-ching! Your broker just made a nice fat commission, not because your account grew or was protected, but because it was altered. Work with an advisor who doesn’t get paid investment commissions, because then you know they are putting your needs first from the start.
Perform a Risk Analysis
We have a very in-depth questionnaire which not only helps you understand your risk, but helps you QUANTIFY it. What is your “uncle” number? How much can you stomach in a single year? If you saw your accounts go down by a certain percentage or dollar value, when do you cry uncle, and realize that it’s too much? We can’t guarantee or predict returns, but we can get within a 95% probability range over a certain time frame. Knowing that from the outset will help you better manage your emotions when the tide starts to crash.
Make Necessary Changes, and Understand the Ramifications
When you find your number, then you can start to strategize. Reallocation can sometimes put you in a better circumstance, not only in regards to risk, but also when it comes to income distribution and tax-efficiency.
But one thing that you have to understand is that if you re-position to more conservative, or non-correlated investments, you will now be in new territory that you have not yet traversed. What I mean is that you won’t be able to compare YOUR portfolio to the S&P 500 or the Dow, because you will no longer have a cookie-cutter portfolio correlated to those benchmarks.
If you choose to work with an advisory team like ours, you will now have access to institutional private wealth management, much like that found in hedge funds or pension funds. You won’t be able to compare it to the overall market, because not all aspects of your portfolio will follow those benchmarks. We want to help you make money even when the market is going down (or at least shelter you from too much loss). And when the market is up, we want to participate in some of that gain, but we may not always outperform it. When the tide is going out, you may not ride with all the currents, and perhaps, you’ll even be going against the current. What you can take pride in is that your portfolio and strategy will be custom—tailor-fit to your risk tolerance, concerns, and goals. Custom, although it may be different, will give you more confidence in your strategy because you played a part in designing it. And hopefully, when the tide comes in, you will not be like so many who were ashamed in 2008.
Questions, comments, concerns? Feel free to contact me!
732 364 5462
At Family Focus Financial Group, Rich develops unique retirement strategies for his clients and recognizes that there is no one-size-fits-all approach. Rich is committed to developing both a custom strategy and close relationship with each client. He believes maintaining a relationship with our clients will ensure their strategy is always on course to reach their goals. Rich Feola maintains an insurance practice and the fiduciary standard of Investment Advisor Representation, a series 66 licensed registration, with Global Financial Private Capital, an SEC Registered Investment Advisory Firm.
*Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor. Global Financial Private Capital and Family Focus Financial Group are not affiliated companies. Not intended for specific legal or tax advice. Any views expressed are for information purposes only and should not be construed in any way as an offer, an endorsement, or an inducement to invest or purchase insurance products.