Inflation, recession, and sky-high interest rates are impacting our daily lives. You may feel the pain at the gas pump or while on vacation, buying groceries for your family, or considering the purchase of a new home. Certainly, how the economic climate has changed our lives will eventually influence how we invest our hard-earned money.
The benefits of watching your assets rise in value include better sleep at night, the satisfaction of participating in the longest bull market in history, and feeling well-prepared for retirement. It would be dreamy if the stock market could continue in an upward fashion forever, growing off the charts. But as they say, all good things must come to an end, and this end is beginning to look a bit bumpy compared to the last 11 years in the stock markets.
Did you know the average length of a bull market is 3.8 years? Our longest run was 11 years - 2009 to 2020 - that ended with the onset of the Covid-19 pandemic. But as we discussed in How the Fed Burst the Everything Bubble, the decline only lasted a few months, and the recovery was swift thanks to the Fed’s intervention.
As we witness the beginnings of a new marketplace, no longer supported by Quantitative Easing, you might wonder how your investments should change to match this new uncertain economic landscape.
Simply choose your preferred basket of stocks and let it ride. Don’t worry about performance or fret about the news because you are in it for the long haul, no matter what, because you have nerves of steel, and that giant downturn won’t keep you up all night, right?
Acting as a passive participant in a robust stock market is easy. You have reduced costs, you don’t have to worry about market timing, and you are living your best life, hands-off of the handlebars and carefree.
So are you prepared for risk? Can you really stomach a significant correction? Volatility often makes humans a little dumb and emotional, leading to poor life choices. Forgetting “it” is not as easy when markets take a tumble and even harder when they fall.
“The way risk is handled can have a substantial impact on an
investor’s ultimate success. Our approach for all Vineyard strategies involves applying layers of protection as needed in response to changing market conditions, with the goal of providing the most protection during times of significant market deterioration.”
Vineyard Global Advisors-Our philosophy
When the market is down, you feel a little less wealthy. When the world faces bad news - pandemics, layoffs, recessions, bankruptcies, inflation, and wars - that’s when having an active partner who is prepared and ready for all of this - pays off.
Stock market crashes and corrections are an inherent risk of investing, and trading involves risk. It is essential to have a plan in place for how you will manage all of that risk. Active management offers some attractive features. Here are a few:
“To lessen the volatility of Vineyard portfolios, we employ a dynamic risk management process that adapts the level of exposure to what the current environment requires.”
Learn more about Vineyard’s strategies
Taking an active role in protecting your gains from the recent historic bull market may be the right move, especially if you are in the distribution phase of your investment career. Understanding the amount of downside volatility your portfolio may endure and its impact on the probability of meeting your investment objectives is paramount.
Ask yourself this simple question: What is more important: beating a benchmark or meeting your retirement objectives?
If your answer is: beating a benchmark, then going down -25% when the market is down -30% is a win…or is it?
