volatility

The Ultimate Hedge: How Do We Enjoy the Journey to Long-Term Wealth?
A road with yellow text that reads: Let's go

Suppose someone told you, “I’m worried about what will happen in the future, so I want to make sure I have less money when I get there.”

This makes no sense, and yet, it is essentially what conventional investing wisdom tells anxious investors to do: “Hedge your risks! Seek safety!” But what does this mean? When investors choose “safety,” they are sacrificing their growth over the long term. In return for stability in the short term, they are choosing a smoother ride to a poorer future.

It’s human and normal to feel concern for the future. But choosing, in the moment, to soothe that short-term fear about long-term returns by avoiding volatility means you may be sacrificing those exact long-term returns that would soothe your concerns.

And investing for the long term doesn’t mean foregoing spending—it means a little bit less short-term spending now in exchange for (hopefully) a little more spending overall, in the long run. Spending more money now does mean that you will miss out on opportunities to invest that money for compounding returns, so it can be another road to a poorer future.

Choosing to invest for the long run is not a path of deprivation. Suppose the worst of the worst just happened last week: nuclear war broke out, or a giant asteroid hit Texas, or maybe you got struck by lightning. Should the worst happen, you are not likely to go out wishing that you had invested more conservatively: “If only my balances hadn’t wiggled so much! If only my returns had been lower!”

But maybe you could go out a little more content knowing that at least you committed to a possibly-more-abundant path: you chose to focus on the long term, and maybe you enjoyed some of it along the way. Maybe you found the perfect house for you, maybe you took that amazing vacation with your loved ones that you’d been dreaming of. You made your life happen along the way.

We invest for the long run; we spend for the long run too, so to speak. We don’t invest for a poorer future; we don’t spend beyond our means. (The road to broke is never worth it.) And, as always, you need to understand where your short-term money is—and keep it out of your long-term buckets.

We think the smart money is in investing for the best possible future. But we never know what the future may hold, so it does make some sense to hedge your bets. At 228 Main, we don’t tend to think of hedging investments in terms of bonds or gold or real estate—or any conventional option that sacrifices returns for Future You in order to pander to the fears of Current You.

Instead, you could continue investing for long-term growth and spend some money on the ultimate hedge: living your own best life.

Ready to talk about what this means for your portfolio? Call or write, anytime.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

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Play the audio version of this post below:

The Ultimate Hedge – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

What We Do—But Mostly What We Don’t

Organizations sometimes use “mission statements” to capture their core focus or values. In a sentence, why does this company exist? What is its main purpose? What’s the goal?

It’s a useful exercise. If we had to spit it out, what would we say we do? We invest.

There are a lot of ways to flesh out and explain this mission (and we do that, often, in our communications!). But we also consider ourselves contrarians. So it makes sense that we also like to explain our work in terms of what we don’t do.

We invest… but not with guardrails. No training wheels, no buffers, no timing schemes. We don’t give guarantees, and we will not offer a false hope of market returns without market volatility.

Why don’t we like that stuff? All of those things cost money or opportunity—or both—and thereby limit our future wealth.

So you won’t see us whipping out any literature about risk that confuses it with volatility. You won’t see pie charts that arbitrarily slice up a portfolio. We won’t pretend to know better than you about your goals or how you live your life.

We seek to invest for the long term when the cost of owning a percentage is lower than the value of the ownership opportunity, in our studied opinion—even as we know that the market price will fluctuate, even as we know we will not always be right.

But a smoother ride to a poorer future? No thanks.

Clients, want to talk in more detail? Call or email, anytime.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy assures success or protects against loss.

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Play the audio version of this post below:

What We Do—But Mostly What We Don't – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://228main.com/2023/07/19/what-we-do-but-mostly-what-we-dont/.

In Any Language, There’s One Simple Goal

Hope, optimism, belief, notion… In our line of work, it doesn’t matter how you say it. We’re banking on the idea that, overall, we’ll see more up than down.

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If All Your Friends Did It…
photo shows a pile of pigeons sitting on top of each other on a telephone wire in a partly cloudy sky

“If all your friends jumped off a bridge, would you?” Does this line give you any childhood flashbacks? (Rhetorical questions abound in today’s reflection!) We’ve been noticing the number of headlines featuring the word “concern.” 

  • “Is this development a cause for concern?” 
  • “Top officials express ‘concern’” 
  • “Latest numbers raise concern” 

Whether it’s about the latest COVID-19 ripple effect, consumer prices, or bottlenecks in different industries, there seems to be plenty of concern still going around. 

We’d like to pause here, though, for an important distinction: “concern” is not the same as “panic.” Life is full of “troubling developments.” We get to choose which stimuli rev us up and which improve our view of reality. Aren’t we better for having a more accurate picture? 

On a recent morning, I noticed lots of action online and in the news that might have startled some investors. I decided to spend a few hours in the office that I hadn’t planned on, just in case there were calls to catch from you, clients. There wasn’t a single ring. 

I should’ve known better. 

“If all your friends jumped into a panic, would you?” Of course not. In fact, there’s that other classic line that makes a lot more sense: “This is no time to panic.” 

Panic rarely helps. Those bursts of energy may have served us when it was time to run from an animal of prey, but these days that’s not exactly a regular demand.

Soothe your system, then let’s get some perspective, gather the facts… and go from there. The leap to panic is a shorter—but way more costly—trip. Clients, want to talk through anything troubling? You know I’m here for that. Write or call, anytime, and we’ll sort it out together.

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Play the audio version of this post below:

If All Your Friends Did It… – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

I. AM. EXCITED.

Maybe you’ve noticed… but I can be an enthusiastic fellow! But some believe emotions don’t have a role in investing… I’ve got some thoughts.

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Growing Market Geniuses
photo shows two silvery arrows pointing opposite directions on a yellow background

Author F. Scott Fitzgerald wrote, “the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” 

What if I told you—the best clients in the world—that you (yes, each and every one of you) have that first-rate intelligence? 

See, there’s something in our work together that tests this idea, just about on a daily basis. When you join us, you learn to live with the volatility in the market: it goes up and down, and we accept this as a feature of the ride. 

Very often, it goes down faster and deeper than it goes up. We may expect a 5% drop around three times a year: we might see a 10% drop around every two years. Meanwhile, gains of 10% are few(er) and far(ther) between: we’ve only seen it twice in the S&P 500 this century and only four times in the whole of the last century. And those gains have usually come shortly after one of the big drops. 

But we wouldn’t be in this business if, in the long run, the market went down more than it went up. 

So what gives? There are two seemingly opposing ideas about the market: 

  1. Drops go down faster, farther than gains go up.
  2. It goes up more than it goes down. 

Clients know the secret: the first idea is all about daily events, and the second idea is about the long haul. No guarantees, of course, but it is possible that these things can both be true. We just care less about the former. 

Therefore, if you consider yourself a member of the best client base in the world, then I consider you to be of first-rate intelligence. 

We’ve grown a community of geniuses here at 228 Main. Want to talk more about what this means for you? Write or call, anytime. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmapped and my not be invested into directly. 

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Play the audio version of this post below:

Growing Market Geniuses – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

In Any Language, There’s One Simple Investing Goal

Hope, optimism, belief, confidence… In our line of work, it doesn’t matter how you say it. We’re banking on the idea that, overall, we’ll see more up than down.

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On Having a Seasonal Bout of Whiplash
graphic shows a white question mark sitting on a ledge against a bright blue wall

Trying to make sense of stock moves during earnings season might make you sympathize with Elmer Fudd.

Maybe you’ve seen the classic cartoon that goes like this: Bugs Bunny and Daffy Duck, chased by the hunter Emler Fudd, start arguing over which animal Elmer is supposed to be hunting.

“Duck season!” Bugs yells.

“Rabbit season!” Daffy insists. They continue this way until Bugs seamlessly switches his response to “Rabbit season!” At this point Daffy Duck counters with the only logical response… “Duck season!”

Elmer promptly shoots his foolish prey.

And now everyone’s shouting, “Earnings season!” Each company that issues publicly-traded stock must report about its financial wellbeing quarterly. In theory, the effects of this process should be simple for investors: a company that posts a good performance should see stock gains, and a company that posts a poor performance should see stock losses. Right?

But many folks view earnings reports through the lens of their expectations. A company that does well might still seem like a disappointment to those who expected even more from it. And when a company beats consensus expectations, some investors may second-guess the showing and bet on an even bigger blowout.

Stock prices can swing wildly up and down in response to earnings reports, with less logic than the duck season, rabbit season debate. If you listen to market commentary you may hear many different (even contradictory) explanations for why a company dropped on seemingly good earnings or rose on seemingly bad earnings.

Zoom out: ten years from now, do you think you will remember what one of your stock holdings did in response to one earnings report those many years ago?

The big investment news stories worth remembering will be about bigger issues than a quarterly earnings report.

We already know stock investing involves volatility—and some of it comes around like clockwork every three months. Clients, if you are ever wondering about sudden market moves, give us a call before anybody goes daffy.

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Play the audio version of this post below:

On Having a Seasonal Bout of Whiplash – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

If All Your Friends Did It…
photo shows a pile of pigeons sitting on top of each other on a telephone wire in a partly cloudy sky

“If all your friends jumped off a bridge, would you?” 

Does this line give you any childhood flashbacks? (Rhetorical questions abound in today’s reflection!) We’ve been noticing the number of headlines featuring the word “concern.” 

  • “Is this development a cause for concern?” 
  • “Top officials express ‘concern’” 
  • “Latest numbers raise concern” 

Whether it’s about the latest COVID-19 variant, rising prices for consumers, or bottlenecks in logistics, there seems to be plenty of concern going around. 

We’d like to pause here, though, for an important distinction: “concern” is not the same as “panic.” Life is full of “troubling developments.” We get to choose which stimuli rev us up and which improve our view of reality. Aren’t we better for having a more accurate picture? 

On a recent morning, I noticed lots of action online and in the news that might have startled some investors. I decided to spend a few hours in the office that I hadn’t planned on, just in case there were calls to catch from you, clients. There wasn’t a single ring. 

I should’ve known better. 

“If all your friends jumped into a panic, would you?” Of course not. In fact, there’s that other classic line that makes a lot more sense: “This is no time to panic.” 

Panic rarely helps. Those bursts of energy may have served us when it was time to run from an animal of prey, but these days that’s not exactly a regular demand.

Soothe your system, then let’s get some perspective, gather the facts… and go from there. The leap to panic is a shorter—but way more costly—trip. Clients, want to talk through anything troubling? You know I’m here for that. Write or call, anytime, and we’ll sort it out together.

Want content like this in your inbox each week? Leave your email here.

Play the audio version of this post below:

If All Your Friends Did It… – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

Fast Times, Slow Times
photo shows a throttle with an image of a tortoise and an image of a hare

The past two years require some context: the fastest bear market ever then became the fastest recession ever that then became the fastest recovery ever. In fact, the S&P 500 stock index doubled from the low point faster than ever. At the start of the pandemic, with so much fear and uncertainty, the five-week drop was sharp but short.

Then things turned around.

All we had to do as investors was sit tight, rearrange things a little where we saw a chance at a bargain, and wait a short while.

Long-time clients will remember the slow times of the past, when bad weeks in the middle of bad quarters in the middle of bad years seemed to go on forever.

When account balances were lower than the year before.

When it seemed like the economy would never recover.

The human tendency is to believe that current trends or conditions will continue: it makes it difficult to keep the faith in the slow, bad times. But we know how this works, so we keep the faith despite it all. Spring comes after winter. Recovery and growth follow recessions.

The fast times we’ve had recently will inevitably slow down. The next recession, the next bad year is out there. No one knows when. Those who claim to know are so often wrong they can’t be relied upon. We find solace in knowing the tough times may bring us the bargains that make the good times good.

Clients, we will continue to rely on the principles that have served us well over the many years we’ve been at it. Looking for bargains, avoiding stampedes, seeking to own the orchard for the fruit crop. Whether trends are moving fast or slow, up or down, we seek to understand the seasons and the cycles of the market.

We cannot guarantee results, but we’ll still be here doing what we do when times change. Clients, if you would like to reminisce about the olden days or talk about the future, please email us or call.

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Play the audio version of this post below:

Fast Times, Slow Times – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.