Why am I an Investor?

Andy Reynolds

  • Investing is not a get-rich-quick-scheme, but rather an infusion of cash into a company that provides a service or product with the goal of accelerating the growth of the company over time.
  • Ultimately, nearly all investors are trying to grow wealth to increase their net worth, to keep up with inflation and maintain a withdrawal rate, or to provide for the next generation.
  • A thorough financial plan will dictate how to invest and should address: 1) how to handle near-term financial needs 2) how to handle long-term financial needs 3) how market volatility, inflation, and low rates impact your goals 4) and most importantly, whether the plan is aligned with individual tolerance for risk/volatility.

It is without question that COVID-19 has had an immediate impact on not only every American but likely every person in the world.  Whether it is a shift in a work environment, a furloughed family member, or a change in socialization, 2020 will forever go down in history as one of the most unique years ever.  COVID-19 is bringing to the forefront and likely accelerating several trends that will disrupt current life as we know it.  We are seeing these structural changes not only in our daily lives but also in corporate modifications, structural changes to colleges, shifts in entertainment experiences, and most evident an acceleration in the utilization and acceptance of technology.  This environment is not playing by the old rules, where normal business cycle analysis applies; but rather by a rapidly evolving narrative backed by little historical evidence.  In times like these, it is most important to recall the fundamentals of why you are an investor, what you are trying to accomplish, and to understand your personal plan for navigating uncertainty.

COVID-19 is unique.  But so are many of the uncertainties we have faced over the recent few decades.  As we think back, several key points in time should be noted: the dot.com bubble, 9/11, the financial crisis, the Federal Reserve’s Grand Experiment, the Flash Crash, the S&P downgrade of US debt, the Fiscal Cliff, and the list goes on.  These are all unique in their own way and were very concerning at the time.  Intentional, methodical, and thoughtful investing is as important today as it ever has been through these historical turbulent times.

Why do I invest?

As investors, we invest our money to increase our wealth over time.  Investing is not a get-rich-quick-scheme, but rather an “investment” (infusion of cash) into a company that provides a service or product.  It is our goal as investors that our cash infusion into these companies will help accelerate the growth of the company over time.  The key words here are “over time”.  Public markets with trading that occurs at a fraction of a second can sometimes distract long-term investors who are trying to grow their wealth over time.  This distraction is amplified when large, quick movements in stock prices are driven by emotion and uncertainty.  The liquidity that is provided by public markets can be a benefit, but also a curse to the individual investor.  Note, that the opportunity to invest in an IPO and other limited circumstances may be slightly contrary to this philosophy.

What am I trying to accomplish?

Ultimately, nearly all investors are trying to grow wealth.  This may come from a need for a larger nest egg, to keep up with inflation and maintain a withdrawal rate, or to provide for the next generation.  Accurately and honestly detailing goals within a portfolio is always paramount, not just during a period like today.  If done correctly, now more than ever we must trust our fundamentals, our core discipline, and our investment philosophy.  Near-term needs should be set aside in cash/bonds, while mid/long-term risk assets must continue to be allowed to navigate through this volatile period.  We still believe long-term investors will be rewarded.  Until this belief is no longer the cornerstone of our philosophy, jumping in and out of the market likely creates more challenges than benefits.

Does my plan work for me?

As we start the second half of 2020, global indices are nearing their beginning of the year values.  This means that halfway through 2020, the rollercoaster ride has resulted in far less damage than that was experienced only a few months ago.  As we reflect on this time, we must ask ourselves:  Does my plan work for me?  Do I understand my plan?  Do I have a plan?  We do not expect volatility to subside as we navigate through the second half of 2020; reviewing the plan we have in place can provide comfort in a time of distress.  A thorough financial plan will dictate how to invest and should address: 1) how to handle near-term financial needs 2) how to handle long-term financial needs 3) how market volatility, inflation, and low rates impact your goals 4) and most importantly, whether the plan is aligned with individual tolerance for risk/volatility.

We have worked hard to implement and maintain thorough, academically based, and unemotional plans for all clients.  Please do not hesitate to reach out to review your plan with us.

 

Ballast, Inc. (“Ballast”) is a registered investment advisor. Certain advisory persons of Ballast are also registered representatives of APW Capital, Inc, (“APW”) Member FINRA/SIPC.,100 Enterprise Dr, Ste 504, Rockaway, NJ 07866, 1-800-637-3211. In their separate capacity as registered representatives, securities are offered through APW. Ballast and APW are not affiliated.

Weekly Update