Running the Race

Long-term investment goals can often be thrown into chaos by life’s challenges. The collapse of housing prices, a crashing stock market, job loss, a divorce, or a hot stock tip that didn’t pan out, these all can create obstacles to achieving long-term investment goals. You can probably think of other obstacles specific to your situation. Overcoming and minimizing the impact of these events can be key to achieving long-term investment plan success.

You have to stay in the game, run the race, or you will never win. This past weekend was the 135th running of the Kentucky Derby, a tradition laden sporting event. For those who missed it, the race was won by “Mine That Bird”, a 50:1 long-shot who was given no chance to win by the experts. He had lots of obstacles to overcome. He was the smallest horse in the race. He was the cheapest horse in the race, costing only $9,500, compared to the millions spent on the other horses. He was ridden by a journeyman jockey, not a “superstar”. His trainer (who had a broken foot) vanned him from New Mexico, while horses owned by the Dubai ruling family flew in private jets to Kentucky.

But he showed up, he ran the race, seized the rail during stretch, made a strong tactical move, and amazingly he won! -resulting in a huge payoff. What does this have to do with investing? Consider these lessons:

1. Stay in the game-Those who got completely out of the market have missed some nice returns during the recent rally. As we say, “It’s not timing the market; it is time in the market!”
2. Don’t follow the crowd-The doom and gloomers who got out of the market have missed some gains, but those who go diving back in to chase returns now may also be disappointed. The market is slightly overvalued at this point.
3. Look for value-Favor investments that are attractively valued compared to the overall market, even after this run up. Don’t just buy for the sake of buying.
4. Seize opportunities-Do some tactical buying or selling when assets become extremely undervalued or overvalued. Like we did with High Yield Bonds two weeks ago.

We urge our clients to stay in the game, overcome your obstacles, and run the race. We are always paying attention to both valuations and opportunities in the markets. We look forward to big payoffs for your investment plan in the future, not necessarily right now!