Diversify strategies and build in flexibility

Evening out the swings in income and work-flow in business takes practice, patience, strategy, and intentionality.  Business owners should always be marketing, even when they’re busy.  They should either do it themselves or delegate it to an employee. Business owners should always be “working” on the business they brought in (again, either themselves or by employees). This evens out income and it evens out work-flow.  It takes time to make this the culture of one’s work day and one’s business. Then, on top of that, there’s the hard decisions of how much to set aside in boom times for leaner years.  Is the money best saved or reinvested in the business? All these challenges are on-going in business. Been there, done that, still doing it. The balance and the planning have to be intentional.

The same is true for your portfolio.  We use a platform that allows our clients to take advantage of the brain trust of those with PhDs and master’s degrees to determine how their money should be invested based on their philosophy(ies) and willingness to take risk.  Notice I used “philosophy(ies).”  This platform allows my clients to employ different money managers with different philosophies all at the same time. Because, let’s face it, the market is going to do what the market is going to do, and every money manager has an opinion about what you should do as a result, from “buy and hold” to “stay in cash and actively manage investments for positive returns.”  Just as in business, as in portfolios – sometimes there are tough decisions to make along the way, but if one builds in different strategies and provides flexibility for money to grow, chances increase that one will reach investment goals that serve their lives. When the time comes to make changes, changes can be made easily and with unbiased advice.

While I can’t help you directly with the business decisions, I can refer you to people who can.  And if you want to talk portfolios, please give me a call.

Even a broken clock is right twice a day

Look at predictions this way:  It’s everyone’s chance to put their hat in the ring in the game of “I told you so.”  That’s all.  Somebody is going to get bragging rights at the end.  I often tell my clients that my crystal ball is as good as theirs.  I might be more educated or more experienced or more articulate about it, but it’s really just as good as anyone else’s.   Remember, past performance is not a predictor of future results.  Just because someone’s gotten it right in the past doesn’t mean that person gets it right this time around.

There are many folks out there saying the S&P is going to be up substantially within the next two years.  Time to throw all your money into the stock market, right?  Not so fast.  The last “secular bear markets”—that is, those extended periods of time since 1906 in which the market has ultimately been down from the beginning of that period to the end—have averaged about 15 years.  We’re about 10 years into this secular bear market.  Understand that even within secular bear markets, there are years that are “up” and there are opportunities to make money.  So, yeah, the markets might be up the next two years, but that doesn’t mean we’ve entered an official “secular bull market”—that is, an extended period of time in which the markets are up.  And we won’t know that until we’re officially into it, which takes 20/20 hindsight years from now.

What almost all bear markets have in common is volatility.  You have to manage volatility.  It’s a silent killer on portfolios.  Go back to your plan.  Make adjustments according to that plan.  Do your best not to lose money and don’t be greedy.  You don’t need to capture the top of the market to meet financial planning goals at risk of a significant drop.  Balance your allocations, reduce your volatility, and even out your returns so that you ultimately meet those financial goals over time.