Want content like this in your inbox each week? Leave your email here.
equity investing
It Goes Up and Down: Some Questions for a Moment Like This
The history of the stock market can be summed up pretty well: it goes up and down. As for the future, we cannot know for certain whether it will continue to go up and down—or on what schedule—but it seems reasonable to take the liberty of guessing this whole “up and down” thing may persist.
When things are down 20% from their most recent peak, and we recognize it goes up and down, this may well be as good a time as any to invest.
We might have a recession, but current lower prices already reflect a lower outlook. You could say sentiment is already in the mix, already baked into prices. And anyway, where there’s a recession, there’s surely a recovery to follow.
Do we know the timing? Nope. But we never do. (That’s where the whole up-down thing comes back into focus.)
There is much we do not know, but we have faith that perhaps our guesses may be good enough to get by. We believe, for example, that in the future there is money to be made by companies that meet our needs. We have a hunch we will continue to eat, shop, entertain ourselves, wear clothes, go places, communicate, create, and do all those other things humans tend to do. And we have an opportunity now to invest in companies that could provide those things then.
Clients, some things to consider at such a moment as this:
- Is there room to start or add to a Roth or IRA?
- Should some funds in a stable-but-stagnant form perhaps be invested for long-term growth?
- Would a Roth conversion make sense given these lower prices?
It goes up and down. And when we invest for the long run, we commit to the ups and the downs both. One never knows when the trend will change, just that it very well may.
If it’s time for you to add to long-term holdings, please email us or call the shop—anytime.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
It Goes Up and Down: Some Questions for a Moment Like This – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
It’s a Market of Socks!
Imagine buying a value pack of socks. Unlike your everyday value pack, this one contains 500 pairs of socks, and every single pair is different. Some are ankle-height, some crew. Some black, some brown. Some striped, some filled with pictures of cheese. Some will become your favorite socks ever, and some of them you’ll become embarrassed to own.
All in all, the pack could still turn out to be a good deal, right? But one more thing: you can’t break up the set. If you really wanted to return one pair of the value pack, you’d have to toss all 500 pairs back. Even those favorites!
Things could get hairy. If you ever needed to pull back, and no longer had room for 500 pairs of socks, you’d have to clear house and start from scratch. Discover that one sock had a hole? Live with it, unless you’re ready to pitch the other 999 socks too.
Doesn’t it sound like more fun to only buy the socks that you like best? Socks that you can actually imagine owning? Or socks that may have untapped potential (think of those warm, fuzzy ones you’re glad you got for the depths of winter). And—when you need to get rid of a sock—you’re not losing your whole collection.
Some people do buy stocks that way in effect: indirectly, 500 at a time. But what a tremendous privilege and exciting challenge to pick only those stocks, I mean, socks that you find most worthwhile.
Clients, if you have any sock tips, email or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
It's a Market of Socks! – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Big Chance and No Chance
We’ve written before about how the stock market is not a casino, and in light of recent remarkable events, other professionals are reminding the public too.
What had been a $4 stock recently ran up to over $400. Although we heard a hundred different ideas about what the episode meant, we can almost certainly understand that no, the company did not actually become a hundred times more valuable.
We do not know the future, so I can’t tell you that buying after it made headlines is going to turn out poorly, but (in my opinion) you’d have far better odds at an actual casino.
Let’s think about that for a second. Have you ever put a little money on something that had the chance to turn out really big? A long shot at the race track, a chance on a huge lottery payout, or stock in a company that might make a lot of money if it doesn’t go broke?
Our business in here is sound investing, not gambling or speculating, though I myself have considered the odds and laid my money down a time or two.
But this recent example buzzing in the news isn’t like that. It’s one of these situations where lots of people get caught up in something that has the same practical meaning as flushing money down the toilet.
It would be better to invest wisely, spend well, and plan for the long haul. For some, chasing those big chances can be fun in moderation. But we don’t advise it become a daily activity.
Jumping into something with even worse odds than those big chances? We wouldn’t count on anything longer than a long shot.
Clients, when you have questions or concerns, please reach out.
Want content like this in your inbox each week? Leave your email here.
The Joy of Ownership
The old fashioned equity culture is about owning shares in companies believed to be durable, and holding them through the ups and downs. Often, these might include the familiar names you see on the products in your cupboard or medicine cabinet, or around your home or office.
An ownership share in a blue chip company may fluctuate in value, but a share is a share. The long term growth in the American economy has generally been reflected in its companies. Of course, there are no guarantees about what the future may hold.
More than a decade ago, in the financial crisis that began in 2008, we noticed something different about people who knew the companies they owned. Compared to those who owned investment products consisting of scores or hundreds of holdings, owners seemed to understand that they held shares of ownership in actual businesses. While the value of the shares might fluctuate, a hundred shares generally remains a hundred shares.
If you have this understanding, it may help you maintain a long term perspective, and hold on through the temporary price declines associated with recessions or market corrections. People with indirect holdings by way of products managed by people far away may not feel the same connection to their investments.
We are not suggesting that one strategy is more profitable than the other, only that greater clarity about one’s holdings may be helpful.
It makes sense to use the right tool for the job. There are some investment exposures which are best obtained by something other than direct share ownership. But all things being equal, we prefer to have shares in actual companies, not investment products made out of many underlying holdings.
Clients, if you would like to talk about the joy of ownership or anything else, please email us or call.
You must be logged in to post a comment.