For the past 20 years I have played tennis recreationally and competitively. I love the sport.
Once upon a time though, I was a boxer. To be more specific I was a novice level, amateur boxer with only a handful of official fights. If I am being honest, I was not terribly good. I did it mainly because I have two lifelong friends who were really into it.
One went on to have a good amateur career and the other, who is now the head trainer at the gym we attended, had an excellent professional career. I think what I enjoyed most about boxing was the comradery of shared experience.
I now realize that boxing was not for me despite the fact that I had many of the physical tools required to excel. What I lacked, however, was the psychological makeup of a boxer. Fighting, sparring as we call it, again and again, night after night, stressed me out and wore me out. Before long, it just was not much fun. So, I would take six months or a year off and go back for a while. This pattern played out for two decades.
People who learned that I boxed would sometimes seem extremely impressed. They would ask questions about what it was like to punch someone – strangely rewarding – and get punched by someone – not so much. Often, they would express a secret desire to try it one day. As you can imagine, the school bullies would steer well clear of me and that did not make me sad either. Overall, I liked being thought of as a boxer, but I did not love boxing.
I was not cut out for it.
Conversely, I love almost everything about tennis; playing it, watching it, talking about it, even training for it. One thing I have noticed is that when people find out you are a tennis player, it does not illicit the same level of respect and admiration that being a boxer does. For me, the down side of boxing outweighed its upside whereas in tennis, the opposite was true.
I have had conversations with clients that caused me to reflect on my experiences in the “sweet science” and tennis as compared with choices we are confronted with in investing. The discussions I am thinking of usually contained sentiments like this:
“Scott, I am worried about the market and I do not want to lose what we have gained, but I still want to keep making money.”
Or
“I am hearing scary things about the stock market Scott. What can we do so that we will continue to do well but not lose money if the market crashes again?”
To be sure, these are understandable feelings. That said, the formulation of those concerns should be well and carefully noted. Some of us are more risk averse than others. Just like some of us have a higher tolerance for being hit than others. We need to be honest with ourselves about our predilections and preferences if we are to achieve what we truly want, in a way we can live with.
We all want to make great returns on our money without ever seeing the value of our assets go down. And while there is a cross section of investors who I believe can tolerate market gyrations and fluctuations, I know of no one who remained 100% calm during the crisis of 2008. The truth is that as long as we remain invested in markets like equities (stocks,) real estate, commodities, bonds, gold, etc., it is very likely that at some point, we will see a decline in asset values, perhaps a very significant one. In fact, it may happen several times over the remainder of our investing lives. Such is the nature of the beast.
Ask yourself the following question:
Are downturns in the investment markets, or even just the thought of significant downturns, leaving you feeling anxious, stressed out and worn out?
If the answer is “yes”, perhaps you are not cut out for this. And that is fine! There are ways to build wealth while working toward reducing market risk and volatility. There are some approaches, that might take us out of certain markets entirely and thereby reduce risk in one area, at least, substantially. I hasten to add that absolutely no portfolio can or will eliminate all risk. But things can be done to reduce it.
Realize, however, that there will be tradeoffs. While gut wrench, heartburn and agita might become a thing of the past, it may not be as fun when the stock market is raging and your friends and colleagues are achieving bigger returns compared with your own.
As the great economist Thomas Sowell says, “Life doesn’t give you exactly what you want, it gives you choices.” If, being honest with yourself, you determine that you are not cut out for market volatility, there are other options available to you.
Perhaps working with a financial planner you trust can help make those alternatives clearer for you. Learn what is available to you, make sure it conforms to your tolerance for risk and volatility and take action.
Scott R. McGimpsey January 29th, 2019
This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. Neither Summit Brokerage Services Inc. nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm with securities offered through Summit Brokerage Services Inc., Member FINRA, SIPC