No one enjoys going through down markets…  Even some of the most experienced investors who have been an investor for 25 years and navigated events such as, Y2K, the Dot Com Crash, 9-11, the 2008 financial crisis, and pandemics, etc don’t enjoy them. Market downturns make me emotional, even as a financial advisor with the insight that I have in the markets.   So if that’s true of me, then it’s only fair to assume my clients are navigating the same emotions, or possibly worse.

So, let’s take a second and really get back to basics and think about this.. what are we ACTUALLY doing when we invest in stock markets?  The most fundamental answer is that we are quite literally placing our capital in businesses. In turn, those corporations take our money and use it to grow the business.  As it grows and makes more money, the return on those gains comes back to the company in the form of gross revenue.  Once the company pays its overhead, there is a profit margin, which is then allocated to the investors.

To get even more granular: 

Instead of talking about “markets”, let’s use the example of one business.  Imagine you decide to buy a homebuilding company.  Not a huge public company, a small regional one.  Why would you do that?  Easy answer is because you understand the business of homebuilding. You know that it has a great track record of building homes at scale in a good growth real estate market.  You can’t predict the future, but you CAN look at how that company’s performance over long periods of time and determine that the return on your investment is better than if you just left your money in the bank. Hopefully, you earn quite a bit more because you aren’t guaranteed to gain any profits at all, or even get your original investment amount back.

For this reason, you would only decide to buy a homebuilder company that has an extensive and substantial track record of successfully managing the business through good and bad times.  If you only look at recent history, you can see that this hypothetical company has GREAT years, but they also weathered the economical storms in 2003, 2008 and maybe even this economy.  However, that is to be expected with any business.  You still make the decision to allocate capital into this company, and tell yourself to be prepared for whatever may happen.. In the good years, you are paid very well through distributions and dividend payments.  When the bad years hit, you know you will hold on, allowing the company to navigate the economy until the returns are positive again.

Not every year will produce banner profit or maybe any profit at all.  However, as long as you are a stockholder in this company, you can wait it out.  You wouldn’t call the CFO of the company and demand they sell the entire homebuilding company because of one or two bad years.  While you aren’t cashing profit sharing checks, you also haven’t lost anything because you haven’t sold the company.  

In other words, YOU ARE INVESTED. You are a business owner!

You’re invested in the future of the company and put your money there because you have reasonable expectations that this solid business will make it through and continue to do well over the course of time.

We can apply this same idea to your entire current stock portfolio.  In this case, we have spread your capital among thousands of companies across many markets, sectors and countries around the globe.  It’s the very definition of diversity and diversifying your money is a defensive strategy.  You probably won’t make as much money as the owner of a single homebuilder, but you have a very low probability of your money hitting ZERO.  The owner of a single company runs that risk but as an investor you historically do not.

The markets are not their strongest right now and I feel that, too.  However, we are investors in thousands of companies. We have 50 to 100 years of data to show us that during down times losses can be mitigated if we can remain calm and let our companies navigate through the fog of inevitable bad markets and economies.

Remember why you invested to begin with, because you are likely to earn more money over the long term instead of leaving your money sitting in a bank.  For shorter term situations, you, as my client, have cash or cash value inside of insurance contracts.  These allow your invested money to stay the course and NOT panic sell the companies we own. 

The reality is, capitalism and free markets are powerful wealth builders.  Let’s remain calm and let others panic, because for everyone selling their companies right now, there is another entity seeing the opportunity to buy them for cheap and snatching them up.

Keep in mind, you haven’t lost anything if you don’t sell your company!  Likewise, you haven’t lost anything if you haven’t sold your portfolio of companies!

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5280 CARROLL CANYON ROAD, SUITE 300, SAN DIEGO CA, 92121, 619-6846400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WESTPAC WEALTH PARTNERS LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number – 0L49687. | Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | 2023-158307 Exp. 07/25

Past performance is not a guarantee of future results. Diversification does not guarantee profit or protect against market loss. All investments contain risk and may lose value. Equities may decline in value due to both real and perceived general market, economic and industry conditions.

This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity