Month: May 2021

Why Don’t We Just Pull Back?

photo shows a foggy bend in a road

Clients sometimes ask why we don’t just pull back when the market starts going down.

It is a fair question. We are thinking about a number of things in formulating investment strategy and tactics:

  1. The average decline in the course of a calendar year in the major market averages is about 13% (per Standard & Poor’s 500 Index, S&P Dow Jones Indices). Basically, the market is always going down—and up.
  2. A wag once noted that the market has predicted nine of the last five recessions. In other words, it may decline 10 or 20% without signifying anything about the health of the economy.
  3. The times when it seems to make the most sense to sell out often turn out to be good times to be invested.

In short, the ups and downs are part of investing. We each face a choice between stability of values and long term investment returns. There is no way to get both of these things on all of our money, although we may have some of each.

It is important to know where our money will come from, the funds we need in our pocket. For investors, it is also important to know that our long-term portfolios will go up and down.

We mentioned above that the average stock market decline in the course of a year is 13%. Let’s be clear about what that means: a $13,000 drop on a $100,000 portfolio; $65,000 on $500,000; $130,000 on $1 million.

Here’s some solace: by the time you notice we’ve been skewered, we are closer to recovery than when the decline began. One year out of four, on average, the market (measured by the S&P 500) declines. Think about it—three years out of four, on average, it has gone up.

We don’t pull back because we do not want to miss the rebound. Our experience has been that we can live with the ups and downs. It isn’t always easy, but our experience has been that it works out over time.

Clients, if you would like to talk about this or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing, including stocks, involves risk including loss of principal. No strategy assures success or protects against loss.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.


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The Good-Enough Place

photo shows two rocks balancing in opposition on other rocks on a beach

Clients, in our latest round of portfolio reviews, we’ve been getting into the nitty-gritty with many of you. There are changes we’re suggesting, but we’re also doing a fair amount of listening.

Our recent research endeavor into ESG—those investments that meet particular criteria for addressing environmental, social, and (corporate) governance issues—has deepened many of our conversations.

We’ve written about how ESG investing is harmonious with our focus on the long term, and whatever you call these styles, we’re interested: we want our practices to be more sustainable, more consciously capitalist, more socially responsible… You get the picture.

So what are we learning in our efforts to be more intentional? Well, that doing good may mean taking the time to define what “good” is. Every human endeavor comes bearing flaws, but how do we minimize harm and maximize long-lasting good?

The hit show The Good Place keeps coming to mind in these conversations. It’s an exploration of the afterlife, asking some hilarious questions about the meaning of life’s choices.

When things get dicey even for those who are “designing” the afterlife, Ted Danson’s character puts it this way: “Life now is so complicated, it’s impossible for anyone to be good enough… these days just buying a tomato at a grocery store means that you are unwittingly supporting toxic pesticides, exploiting labor, contributing to global warming. Humans think that they’re making one choice, but they’re actually making dozens of choices they don’t even know they’re making.”

Yikes, right? But just like the characters in this show, we’re trying to come at this with a lighter, more human approach. Given the costs of our choices, which do enough good to counter the cost? Which costs can we live with?

Big questions, important topics. Clients—let’s keep talking. When you want to know what this might mean for your portfolio, write or call.

(For a little levity, Maya Rudolph’s character replies to the speech above: “That’s your big revelation? That life is complicated? That’s not a revelation. That’s a divorced woman’s throw pillow.” The show is worth a watch.)


Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.


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ESG & You: Investing in Worthy Ways

photo shows sun shining through tree branches

We’re all about the long term at 228 Main. And we’re interested in companies that are oriented to the long term… like the ones trying to take care of the environment, operating in ways that are sustainable for employees and clients and suppliers, removing barriers to entry—these are all long-term processes.

And in our opinion, we believe companies like this happen to do better, too.

Maybe you’ve heard about ESG investing—the practice of putting money into those investments that address environmental, social, and governance issues.

We’re not interested in fads, but this style is all about the long term.

Any human endeavor will have its flaws, but we’re figuring out how to bring the best qualities of ESG into our work with you.

First, we can keep certain kinds of companies off our buy list. Those businesses that deal in tobacco, alcohol, and gambling, for example, don’t align with many people’s beliefs about individual wellbeing.

Second, we can add certain companies that meet sustainability criteria, like environmental benchmarks or diversity among corporate leadership.

Trying to grow your bucket is always at the heart of our work. But we shouldn’t have to choose between performance and other worthy results. Let us know if ESG goals are a priority for you.


Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.


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Why the Headlines Don’t Matter

photo shows an out of focus stack of folded newspapers on a wooden table

You know that we love all the benefits provided by 21st century communications. We can connect with you almost instantaneously, in a variety of ways.

But in the last few decades, these speedy possibilities have driven many outlets into what’s called the 24-hour news cycle: parties with messages to share feel the pressure to deliver their coverage the fastest.

In some arenas, the speed matters. (Can you imagine a traffic report coming out after the fact?)

We don’t feel that pressure. We don’t worry about churning out our stories at 228Main.com.

So why don’t we have posts every day? Why don’t you see my face on your screens all the time?

Because the news cycle is all about directing resources trying to capture attention… And we’re not in the business of “capturing” anything.

Instead, we like being consistently present. Our media give us an outlet to think more deeply about our principles, make sure you know what we’re working on, and communicate important strategies for the big themes in your (our clients’!) lives.

So when can you expect to hear from us?

  • A little each week, online, where you can take in as much as you want. (Not getting our stuff? Drop your email here for our 5-minute weekly digest.)
  • When there’s a new bargain we’re excited about.
  • As there are changes that could affect your portfolio.
  • If your goals and plans and planning reach new milestones.

So here’s what the 228 Main news cycle comes down to… The calendar is not the boss of us. The internet is not the boss of us.

The financial news outlets aren’t even the boss of us.

You are!

Clients, got something we need to hear? Call or write, any time.


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That ’70s Post

photo shows a close-up of the 1970s LOVE postage stamp for 8 cents

A TV sitcom from the turn of the millennium, That ‘70s Show was the story of teenage friends in the late 1970s. A period piece, the trappings of the show remind me how dramatically the life of the American consumer has changed—and yet the ’70s might come around again.

No, we are not going back to a time when the great new retail products included patented suitcases with wheels, Mr. Coffee automatic coffee makers, and Pong games. But for certain economic trends, That ’70s Show might seem more relevant once again.

Back then, inflation and interest rates were at multidecade peaks, up in the teens. Commodity prices were roaring higher, and shortages emerged. For forty years now, interest rates and inflation have been sliding: rates for each have been near zero for years.

Perhaps, finally, the trend is changing. Inflation rates and interest rates may rise again—perhaps persistently, for a period of years. No one knows for certain.

Inflation means rising prices. Just consider the changes you might have noticed recently with houses and cars and lumber, even our groceries and gasoline. Seems prices are on their way up, quickly in some places.

These things have major effects on the investment markets. Bonds and other fixed income investments may struggle if interest rates move higher; commodity producers may benefit from rising prices. Keep in mind that winners and losers emerge when things change.

We may be getting that ’70s feeling in some ways, but it’s a good reminder that history has provided a solid foundation for our work here with you.

Clients, if you would like to talk about this (or simply reminisce about the ’70s), email us or call.


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The News About Discomfort

photo shows a person seated doing a yoga pose in a field at a pink sunrise

The best clients in the whole world don’t always enjoy the smoothest ride. Clients, I’m not trying to speak for your experience or tell you how you feel… but the ride has been a ride, right?

A core of the households we serve has been with us 17 or more years! The story of our time together can be captured pretty simply, and you’ve heard this before.

“Buy low, sell high” and other classics have become some of our favorite principles: seek the best bargains in the investment universe, own the orchard for the fruit crop, and avoid the stampede.

Our formulations are a little contrarian, but they also aren’t that complicated. So what makes this commentary even worth making? Clients, you know the ride is a ride, and we’ve hung on together. The secret, then, is people hate being uncomfortable.

Buddhist teacher Pema Chödrön explains, “As a species, we should never underestimate our low tolerance for discomfort.” Strengths deepen and develop. Strength begets strength, success compounds. Those forces help us weather the tough times and keep perspective.

We’ll leave you with Chödrön’s take: “To be encouraged to stay with our vulnerability is news that we can use.”

Clients, need a check of perspective? Call or write, anytime.


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Your Safety Net Is Not a Hammock

photo shows a safety net in midair

The advancement of technology has helped humans perform more tasks more safely.

Backup cameras and drift warning systems help curb preventable accidents in our vehicles. Even in our pastimes, technology can monitor more risks and dangers than ever. Big-wave surfers take on, well, bigger waves, prepared with more data about the conditions than ever before… not to mention a jet-ski nearby, ready to help anyone who crashes.

Such monitoring technology may allow us to take on more risk, but this doesn’t mean we ought to. Specifically, this tech becomes dangerous when we let it take over and do our thinking for us too.

Some providers offer tech tools to help “measure” risk tolerance. The tools are, in theory, designed to increase transparency. If we know more about the dangers present, shouldn’t we be able to make better decisions?

For some investors and clients, it’s perfectly comfortable to use such scores to determine the “appropriate” investments. The trouble is that then the tech tool is doing the interpreting, moving from observation to decision.

That middle part—the thinking, the choosing, the deliberation—that’s where we like to focus our energy in this shop.

Many tools may seem like safety nets, keeping us from ever falling too hard, but they should not replace the process.

You may remember The Flying Wallendas, a family that for generations has performed high-wire stunts (one of them crossed the Grand Canyon on live television a few years ago). The family avoids nets when they can.

Why?

The net may make you feel better about the risks involved, but it’s counterproductive—and dangerous—if it leads you to behave with less awareness, intention, and energy.

You must behave as if the risks are always present… And carry on, making the best decisions possible.

Clients, wondering about nets, risk, and more? Let’s chat: call or write anytime.


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