The Curse of Cash on the Sidelines

photos shows empty bench in a dugout

A recent theme among some financial types: lamenting the dilemma of clients who sold out of long-term investments in a panic a year ago, thus missing the following recovery.

The sharp drop in the markets at the beginning of the pandemic was a little unnerving, but those who sold low face a tough question: “When do I get back in?” With the best clients in the world, this is a question that does not come up here at 228 Main. It is worthwhile to consider the factors that lead us to this wonderful state of affairs. We believe there is one skill and one mindset that explain it.

The skill is being able to make decisions in the face of uncertainty. There are very few “lead pipe cinches,” as Grandpa used to say, no absolute certainty about how things will turn out. Investing is largely a matter of sorting out what may be likely to happen—a question of probabilities.

Clients, you know your portfolios inevitably will include some stocks that just did not work out as we imagined. It turns out that our crystal ball is not quite a crystal ball: we can’t know the future. Our experience and our hope is that those stocks that do work out—or perhaps even dazzle us!—will more than balance out the disappointments.

The mindset is that the United States will always get through its setbacks and challenges somehow, and we’ll emerge on the other side with opportunities for new growth and greater prosperity. (Also, if we are doomed to return to the Stone Age, as some portend, it isn’t going to matter what we own. Might as well be optimistic!)

This mindset, combined with that skill of being able to make decisions despite uncertainty, help us stay the course. We believe that sticking with sound strategy has helped us all in the past—and that it offers opportunity for the years and decades ahead. Clients, if you would like to talk about strategy and tactics, or about anything else, please email us or call.

Investing involves risk including loss of principal.

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