Mike Tyson, Market Guru
To our clients and associates,
“Everyone has a plan until they get punched in the mouth.”
All one need do is look at Mike Tyson’s quote above to know why I so frequently remind people of the need to stay the course when it comes to their investment strategy.
To illustrate: I asked a client once why he was so concerned about a 10% dip in the market, especially because he had indicated he was an aggressive investor. He responded, “I am aggressive – when the market’s going up!”
In my 30 years of experience, I have found that people are nervous about the market in three different situations:
- When the market is at all-time record highs, “It’s going to come crashing down!”
- When it’s trending downward, “It’s going to go lower!”
- When it’s moving up or down, “I just know it’s going to drop!”
Along these lines, a very good and long-time friend recently asked about the “impending crash” he heard was coming, and “What are you doing to protect our portfolio?” Without identifying anyone, here was my response.
Thank you for the opportunity to answer this important question. First allow me to talk about a colleague of mine. This man hired a PR firm to get exposure on CNBC. He got up at 4:00 in the morning, went to his local station for makeup and prep and was interviewed for his thoughts on the market - but it never aired. He asked the PR firm why he didn’t get on the air and was told that he used the phrase “cautiously optimistic.” This phrase simply does not bring eyeballs to the screen. If instead he had said “impending crash,” he would probably have gained screen time. People pay attention when they hear they could lose their life savings – and while they are listening, the advertisers have their attention.
The prognosticators who declare there’s an “Impending Crash of Doom” prey on the natural fears of humans that they will lose their entire life savings and be fighting for food in the streets. They often have a hidden agenda to sell gold or Bitcoin or the “investment du jour,” that’s “guaranteed to protect you.”
People like this have been around since before the world’s oldest profession. So when you understandably ask what we are doing to defend against their crystal ball and tea leaf readings, the answer is: “Exactly what we have always done.”
We have developed for you a well-diversified portfolio of stocks and bonds of the world’s greatest companies. It is allocated in a manner that is designed to mitigate the impact of the inevitable downturn – a downturn that is totally unpredictable in terms of when or to what degree. In fact, I expect several of these to occur over your remaining years – just as they have already occurred during the twenty-five years we have worked together.
I’ll focus now on those things we can do to further mitigate the knowable factors influencing your portfolio, e.g., inflation. By holding a portion of your portfolio in equities, we are simultaneously girding against the negative effects of inflation. Equity ownership is the only known asset class that regularly outpaces inflation. In addition, we are committing about 25% of the fixed income portion of client portfolios to Treasury Inflation Protected Securities (TIPS). They not only have an interest rate of return but also an inflation bump to protect against its insidious impact. These are secured by the full faith and credit of the US Government.
So sleep well in the knowledge that we have chosen the appropriate investments and proper allocation of those investments for you to weather a long and hopefully very happy retirement. All you have to do is stay the course.
I wish the very best for you and your family!
Past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.