With down markets and horrors in world news, WHAT ARE WE DOING to mitigate risk and address safety, rising interest rates, & inflation? And YES, we are announcing, if you have retail account(s) at Schwab, or TD Ameritrade and realize you need professional guidance, we have added Schwab to our existing relationship with TD Ameritrade, expanding our list of qualified custodians. So, contact us.
We have found that many investment companies including some of the biggest names in the business don’t actually have a safety net to protect your portfolio. This means that they let investments fall in price indefinitely, under the claim “our mandate is to manage STOCKS, not CASH.” We take a different approach.
We Take A DIFFERENT APPROACH TO SAFETY!
If and when we see a component of a investment portfolio fall past 8% LOSS in the present quarter, we’ll go on ALERT and consider a sale of that position. For example, we held Moderna (MRNA) into the dramatic rise of its value, which peaked at $497/share from our buy at around $307. When European countries blocked use of its COVID vaccine, we SOLD. Today’s market price is $160/share. While it’s true short term capital gains were made and reportable to the IRS, based on today’s price, the LOSS IN VALUE would have been far larger than the capital gains tax on the sale. A safety net matters.
Bonds get SLAMMED in a Rising Rate Environment
If you think holding bonds automatically means “safety,” think again. They only hold their value in a steady interest rate environment. Yes, they GAIN value in a falling interest rate environment… but: Bonds LOSE VALUE in a rising rate environment. With the FEDERAL RESERVE getting hawkish if you are holding BONDS, “BALANCED MUTUAL FUNDS or LIFE CYCLE INVESTMENTS based on RETIREMENT AGE YOU ARE VULNERABLE. There is a teeter-totter relationship between rising rates and bond values. When rates rise, existing bonds go down in price. Even very short term bonds are not giving positive returns now.
AND…. HEDGING AGAINST INFLATION
With annualized inflation rates approaching 8% (February 2022) YOUR CASH HOLDINGS ARE GETTING WIPED OUT. What can we do about this? So far this year, just about the only investments that are making money are in ENERGY and COMMODITIES of various types. Neither of these are low volatility but the TRENDS FOR BOTH ARE ABSOLUTELY POSITIVE and we are reasonably confident that both classes have lots of upside. HOWEVER investing in either of these classes is a “don’t try this at home” exercise. The large assortment of investment vehicles out there that the do-it-yourselfer could buy to seek a hedge may be insufficiently diversified or not well-managed, and this could easily and lead to unpleasant surprises. ASK US and we’ll help you sort out this dilemma.