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There are many negative sentiments that undermine confidence in the markets these days. Short-term headlines highlight rising risk and lack confidence in the future.
All of this noise is evidence-based and, for some investors, concerning. Plus, it’s not aligned with the experience of most investors, as the overhang sets the tone for a head-on collision.
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Perhaps the solution to finding “zen” in your outlook is to go through a planning session with your financial advisor or to compartmentalize your financial picture. Do you have investments in buckets? Alternatively, you can simply fundraise incrementally, followed by a plan to come back as you find a more measured beta. The action sometimes looks like a check.
Ironically, planning for a “black swan” is a contradiction in terms, and more importantly (in my opinion only), an effort to look smart. Deal with what you can control. If you’re nervous about the markets, address the first structural issue.
Answer: It may come as a surprise to some, but it seems that burning money by holding cash is a recent trend. According to the Office of Financial Research, money market funds are at relatively high levels, similar to Covid peaks.
Cash is an asset class that may warrant negative return right now, but its math is clear (negative 5-7% versus inflation). If you were conservative in 2021, your return flow may already reflect a high cash balance. If you were aggressive before, with lots of market beta, silver will help you even more. Cash, as an asset class, is a balancing solution that provides peace of mind in the face of volatility. To be clear, while offering guaranteed capital loss over the long term, even such a loss is quantifiable. Note that as co-PM of BLOK, my eyes are open to this statement, angering questions that Bitcoin is a store of value over cash. My answer: I am neither a trader nor a maximalist. Market volatility can lead to bad decisions, so any extreme positions should be minimized.
Beta-measured volatility in bull markets is exciting and rewarding. However, in a volatile or weak market, people may want to access their financial situation. Our “structure matters” message may be boring, but people’s quality of life can be affected by their financial pressures. It can be difficult to have a clear head at certain times. Compartmentalizing your short-term cash burn and long-term portfolio compartments can help stabilize stress. Such a plan also helps investors know that they have the problem under control. Remember the good news: in most cases, these recent bull markets have likely led investors to hit their targets sooner than traditional assumptions. Final comment: Don’t make extreme decisions based on nervousness. Sentiments are not an investment strategy or the basis of an investment plan.
All of this negativity may be due to a 30-40% drop in media viewership. https://deadline.com/2021/12/cable-news-ratings-2021-fox-cnn-1234899789/
Goldman Sachs pointed to cash piling up in the fourth quarter. https://www.cnbc.com/2021/12/16/big-wealth-investors-are-likely-to-put-money-to-work-in-stocks-after-amassing-record-levels-of- cash.html
What is a black swan https://tradebrains.in/black-swans-investing/
Originally published by Toroso Investments on February 23, 2022.
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