Markets: Covering Our Eyes is a Bad Strategy

Reflated markets from 2009-2014 hid and created bad behaviors. It’s not too late to increase our odds for investment longevity. Many investors are paying too much and receiving little OR paying too little and not receiving enough practical guidance. Perhaps change is unnecessary; still, we need to build a statement of net worth, review cash and investment accounts, estimate new tax bills sooner than later, and prepare a written checklist of acceptable rewards and risks. The behavioral goal is to empower our brain to avoid emotional decision-making in case a real economic storm evolves.

China, Europe, Latin America, credit markets, global central banks, oil markets, currencies, geopolitics, and earnings will directly or indirectly IMPACT OUR retirement assets. Unfortunately, the very best and most vocal resources of the U.S. Federal Reserve, Wall Street, Econometric Models, Robots and Main Street Gurus cannot pinpoint an accurate outlook for 2016. So, let us instead improve cognitive functions with our eyes and an old fashioned pencil.

Let us focus on the more controllable aspects of wealth: saving, spending, and planning. Thus, we are REQUIRED to review, scrutinize, and reaffirm unique circumstances and financial plans. Is there alignment with the plans and fee structures executing on our family’s behalf? The goal is to IGNORE (mostly) the less controllable negatives of lower prices and scary headlines when confidence is reached in the answers to what, where, how, why, who, and how much!

As of this writing, the S&P 500 is slightly above last summer’s swoon to 1,860 from its previous high of nearly 2,135; however, this “normal” retreat disguises the extreme deterioration in markets across the globe. Hold on now…that information should not automatically steer us to buy, sell, or hold. However, it should signal relentless focus on our goals with a margin-of-safety!

20 Years Later…& Lots of Bad Markets

  • 7,500: Approximate number of days I have reviewed financial markets and portfolios as a professional advisor to advisors and private asset manager.
  • 250: Approximate number of days I pivoted from strategic plans to implement new well-reasoned plans.

Whether a professional or novice protector of hard earned wealth, we must address the suitability and reasonableness of expenses, leverage, complexity, liquidity, diversification, and risk management. It is our responsibility to proactively shield assets from the value erosion driven by emotional decision-making, unnecessary taxes, onerous inflation or deflation, and overly standardized or biased advice.

Covering our eyes is a bad strategy if change is necessary, and the only way to know is to look. Think strategically. Apply sound principles of investing, saving and spending. Avoid big directional bets. Also, see this recent Post with highlights on Patience, Discipline, Process, and Customization.

ABOUT THE AUTHOR:

Michael loves to empower investors with his expertise in securities and economic analysis, goals-based wealth management solutions, and FinTech smart decision-support tools. While directly managing over $5 billion in growth and retirement assets; his proactive advice and software innovations have influenced thousands of fiduciary advisors to better their practices and service to clients. He enjoys spending time with his wife and three boys, competing in USTA tennis, and mentoring others to succeed.

Email | Michael@empoweredportfolios.com

Twitter | @MichaelHakerem

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