How to Boost Investing Success in Times of Stress!

Patience, Discipline, Process, and Customization form a reliable framework that's outlasted presidents, recessions, and market crashes since my investing career began in 1993. These mental triggers have also survived the adventures in parenting that began with the arrival of our first of three bouncing baby boys in 2003 and proved their value throughout a "career" coaching youth sports and mentoring young adults.

It’s Tough to Make Predictions, Especially About the Future. Yogi Berra

Navigating the Markets: The Election and Beyond 

So what's next for 2020 and 2021?

Buy Gold or Bitcoin? Abandon the stocks of Apple and Amazon for cruise-lines, airlines, and energy companies? Interest-rates and inflation ready to jump and, if so, will bonds and dividend-paying stocks get hit? How likely is a severely depleting tax regime change on income and capital gains? Is another round of coronavirus aid and economic stimulus on the way from a "Lame Duck” Congress? Older Investors Are Asking: Should I Get Out of Stocks?

Armed with brainpower, super-duper computers, insider information, and sophisticated tools, even the most powerful global institutions cannot outguess elections, viruses, economic data, or next year’s future of financial markets. For a view of longer-term themes, check out our pre-election piece, Election Chaos? What will happen to STOCK RETURNS after the election?

Professionals and novices are inundated with noisy data points--real, fake, half-right, and usually guesstimates. Mainstream economic models from large government and major investment companies have terrible track records. Well meaning, but most economists are not even able to recognize recessions once they have started. Track records get worse when predictions are made on interest-rates, inflation, GDP, actual earnings, etc.

No crystal ball or "black-box" strategy guarantees consistent and successful market timing. So, let us quickly dig deeper into the four words that anchor a framework for clearer thinking in times of added stress and uncertainty.

Patience, Discipline, Process and Customization have proven a helpful and mightily resilient decision-making framework throughout a long career of investing, parenting, and coaching.

😬 Patience helps to promote less emotional decision-making. We have all been in that daunting place, a moment where reactions, words, and instructions are paramount to a more successful outcome. Take a mental moment or even physically remove yourself from a tough situation. Intentional breaths also enhance one's ability to patiently respond when control is momentarily lost--Think control is ever lost with three teenagers?!

Quick Tip: Avoid an immediate investing decision if you have recently been exposed to the flashing of red and green price-change indicators.

Father’s Day 2020 with my boys.

💪🏻 Discipline reinforces adherence to well-grounded investment strategies and financial plans. The temptation to impatiently chase the latest fad, change styles, or to abandon the "game plan" out of fear or greed, often leads to instability that's more detrimental than whatever short-term perplexing, mind-sucking issue exists. 

Quick Tip: Avoid compromises or exceptions only made to make a decision work this time.

Fearful headlines and Twitter feeds sell ads and
keep people glued to screens, but fear
does not make money in the stock market.

📋 Process translates into effective execution of less-emotional disciplines. Successful investors, parents, and coaches rely on consistent methods to evaluate the rewards versus risks of future outcomes. This evaluation of Reward-to-Risk is wired into survival--Is that a stick or a snake? Should we kick an extra point or go for two? What will tomorrow bring if the kids win the battle to stay up too late? Investors benefit with documented reward and risk targets to compare with current prices. Key stats and ratios can help to set the limited price you are willing to pay and the point at which a sale is appropriate for each holding. Preparation should be done prior to the potential constraints of euphoria or despondency.

Quick Tip: Schedule a routine to GATHER & REVIEW your personal financial statement, key documents, and financial plans. For investing strategy, be sure to monitor asset allocation, sector and security weights, tax efficiency (for ex. location of assets, realized & unrealized gains/losses, and your strict adherence to IRS rules), easy-to-see and potentially harder to see expenses of running your accounts, and the risk-adjusted performance of what you are doing. This burdensome but necessary process is essential to avoid random thoughts and decisions.

Tucker, an actual client, gathers assets for review.

❤️ Customization can produce more optimal bottom-lines over robotic or glide-path plans. Armed with patience, discipline, and a process for execution, the flexibility to adjust for the conditions on the field is critical. Hard-earned wealth is proactively built, so unique circumstances deserve collaboration and measured decisions. Simple strategies to achieve lower costs, diversification, and risk mitigation can be achieved while paying less attention to ever changing predictions, predictors, and neurotic markets.

Quick Tip: Be wise with investment recommendations found in newsletters, popular media, from friends, or other widely distributed platforms. While often good advice on the surface, what is right for your neighbor is not always right for your family. 

Best Wishes for the Rest of 2020!

Predictions are tough. This investing year has proven again that Patience, Discipline, Process and Customization are as reliable as ever for handling tough decisions--That's why these words are written on my whiteboard.

Bonus Link: What is customized portfolio stress testing?

Stress Testing is about assessing the potential impact of economic scenarios like #COVID, pandemic recession, NASDAQ Moonshots, and inflation on your unique investments. In a portfolio stress test, we construct “what if” scenarios based on real life macro-economic uncertainties, and measure their potential impact on your actual holdings--No generic mapping to broad indexes. Portfolio stress testing is not about predicting the future; rather, it's an essential smart decision-support tool for identifying and adjusting for downside risks.

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ABOUT THE AUTHOR:

Michael loves to empower investors with his expertise across securities and economic analysis, goals-based wealth management solutions, and smart decision-support tools. Now in his 27th professional year, his proactive research and investing innovations have influenced thousands of fiduciary advisors and their clients. A sense of purpose and service to others fuels his passion to help families receive the wealth management advice and asset management they deserve, require, and desire.

Founder of research-only firm | Michael@empoweredportfolios.com

Co-founder of fiduciary firm | Michael@glenwoodfp.com