I’ve found that experience with capital markets tends to create better investors. I went through nine years of college, first the six-year undergrad plan (I was a horrible student) and a three-year graduate journey (finally got my act together). My experiences with markets, starting with the dot com boom and bust, taught me more than I could ever learn in university. 

Once the dust settles from the current economic turmoil, there will be a lot more clarity than there is today. Meaning, we can’t assume market movements are tied to narrative of the moment. There’s a lot of noise trying to find answers to the volatility. 

The lessons I’m talking about happen years after the fact, when we’ve had a chance to reflect. 

Don’t fight the Fed

This has been true in 2020 and then in reverse for 2022. Easy money policies made investing incredibly easy, now the current tightening has made investing incredibly difficult. 

There was a time where Fed policy wasn’t such a market force. The hope is with interest rates normalizing, although very quickly, is that we can identify a bond as a bond. Or safe savings rates that pay more than zero. 

Sometimes markets don’t need Fed intervention to push higher. Businesses can be great because a country or industry is innovating. 

Buy the dip

In the recent past, nearly every stock market dip in from 2020-2021 was a great buying opportunity because the market only went up. Volatility is the name of the game. There will be periods where investors question their holdings. If they should just sell “because things are going to get worse”. 

There theoretically should be no investible cash on hand to buy a dip because investors should be fully invested and not time the market. It helps to have an investment plan that is a little more in depth than a slogan.

Billionaires who lost X amount

“Mark Zuckerburg lost $100 billion in the past 13 months” and other useless headlines. If Mark Zuckerburg even reads the NY Post, he might be wiping his tears with $100 bills. I doubt he sold any shares during the sell off, if anything, cash rich companies like META would probably benefit from stock buybacks. Investment returns typically reward patient investors and punishes impatient ones. 

Useless headlines cut the other way too. “If you invested 10k in Amazon in 2011, you have this much money”. We can’t make up for lost time and only energy is spent wondering “what if”. 

These headlines generate clicks, that’s why we see them every time the market moves. Stop clicking. 

To the moon

If anyone giving investment advice and has said “to the moon” in an unironic sense, cover your ears. Social media has bred a wave of inexperienced investors classifying luck as skill. If someone is out there making easy money, the market will catch up and close any outsized opportunities. 

The fear of missing out (FOMO) is strong here. Sure, I get jealous if some young investor made 50x on crypto. At the same time, I give a ton of slack to that same investor who lost it all in the crash. 

Single stocks suffered a similar fate. Peloton was all the rage because everyone was locked in their houses. With hindsight, we probably shouldn’t have assumed that everything would remain shut. 

This investment let me down so it doesn’t belong in my portfolio

The biggest mistakes investors will make is to take one period and assume it’ll be that way going forward. I’m talking about you, bonds. They are down 17% YTD on average, precisely during the year we needed them most.

Bonds can be our best friend when there’s trouble. Yes, that friend suddenly wasn’t picking up his phone when we needed him. Relative to stocks over the long term, bonds are much more stable. 

These are typically the periods where alternative funds pick up interest. They are called alternatives for a reason. Not to say there isn’t room for some of these investments, but they typically don’t perform in the way investors had hoped. 

These slogans shouldn’t be considered rules because they assume the future will play out based on the current environment. Sure, some of these may have a life beyond a few years. It doesn’t mean it’s ultimately fleeting. 

The enduring rules are diversification, stick to your risk objectives, understand market movements are random, and stick to your savings plan. Focusing on what you can control will be a much better approach than constantly shifting investment objectives. 

DISCLOSURES: 

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

Although bonds generally present less short-term risk and volatility risk than stocks, bonds contain interest rate risks; the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The information contained above is for illustrative purposes only.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

All investments include a risk of loss that clients should be prepared to bear. The principal risks of CWA strategies are disclosed in the publicly available Form ADV Part 2A.