Hoping and wishing your portfolio will hold up when the market turns negative, and turn it will, isn’t a strategy. Being prepared is the only prudent way to invest.
The last few commentaries have had a bullish bent, and
rightfully so, but it’s important for me to scratch my “always concerned about
the markets” itch.
Here
is a snippet from legendary investor Seth Klarman’s letter. The whole thing is great, but below are my
favorite parts:
- On the current state of the economy/markets: monetary policy is distorting markets, Fed can change how things look, but not what they are, Europe isn’t any better, not many bears left, unsustainable tech business models.
- “Someday, financial markets will again decline.”
- “Someday, professional investors will come to work and fear will have come to the markets and that fear will spread like wildfire. The news flow will be bad, and the markets will be tumbling.”
- “Can we say when it will end? No. Can we say that it will end? Yes. And when it ends and the trend reverses, here is what we can say for sure. Few will be ready. Few will be prepared.”
Currently, in light of all this, Klarman returned $4b to
investors and is 40% in cash. He can’t
find much to buy as everything has been bid up.
Does that mean the market is destined to collapse at any moment? No, and Klarman noted that in his
letter.
But what he does say is that markets will decline
again. I wouldn’t bet against that
assumption. Further, he noted that most
will be unprepared for such a drop and thus will be very vulnerable when this
happens.
Don’t wish, don’t hope.
Have a plan to protect your capital.
That is the foundation of how I approach investing.
The views and opinions
expressed herein are those of the author(s) noted and may or may not represent
the views of Capital Analysts, Inc. or Lincoln Investment. The material presented is provided for informational
purposes only. Nothing contained herein should be construed as a recommendation
to buy or sell any securities. As with all investments, past performance is no
guarantee of future results. No person or system can predict the market. All
investments are subject to risk, including the risk of principal loss.
