Investment Professional
I got engaged on October 4, 2008. During the week of October 6, 2008 the U.S. stock market declined by 18.4%. I’m an investment advisor. The negatives of that week far outweighed the positive.
The newly-engaged me wasn’t sleeping that week. I was constantly coming downstairs into the kitchen in the middle of the night where my fiancée kept a desk and computer. With no chance of sweet dreams, all I could do was check the Asian stock markets. Not only were the numbers red for negative, the losses were so deep I swear I saw flames jetting out from behind the numbers for South Korea, China, Taiwan, Japan, et. al. Previous to this week, I thought the low-fee, dividend-paying mutual funds I had my clients’ money invested in would provide stability in the event of a major market decline. I was wrong.
Cut forward to the present time. There was no wedding day smiles for me; no walk down the aisle. That romance ended with a heartbreak. But I and the stock market have both recovered. I have many more clients today than I did in 2008 and, most importantly, I’m sleeping well. What happened? Simple. I became a negative person.
Not negative in the sense I’m pessimistic about the future or negative in a way that makes me look for the bad in people. When I look at a glass I don’t see it empty or shattered. I became negative in the sense that I studied the investment markets to learn all about the negatives of investing.
Do you know how many years the stock market has been negative in the last 30, 40, or 50 years? I do. Do you know how many months the stock market ends lower at the end of the month than it was at the beginning? I do. How about trading days? Any idea what percentage of trading days that the market is lower at 4:00 p.m. than it was at 9:30 a.m.? Do you know what the average return of the stock market is in the year after a negative year? I do. Any clue how many 5% declines the market has in a typical year? I know that one, too. How about the bond market? Did you know that the bond market and the stock market have approximately equal number of negative months and years? All of that information is now second nature to me.
Did you hear the latest negative news from the Middle East/Europe/Asia/Russia? Or how about that recent drop in oil/natural gas/the USD/the Euro/the Yen? I became a student of every major negative world event from the Cuban Missile Crisis up to the 9/11 attacks. I can tell you what happened to the market based on the news, and where the market was six months later, one year later and five years later.
Why is it positive to be negative? Because it makes it easier to structure investment portfolios that capture the market upside and protect against market declines. Once I learned the negatives of the market I built those portfolios. Beyond that, it became easier for me to convey to clients the history and mechanics of the capital markets.
Being negative has been a positive thing for me and my clients. My job is to deliver appropriate investment portfolios, education and ongoing communication to my clients and their families. Those are all important items. But maybe the most valuable item I deliver is one of life’s great treasures and pleasures…a good night’s sleep.
This was written at the beginning of 2012. I had two story ideas in my head and presented them in this manner. I’m all about educating investor how the investment business really operates and the second half of this piece does a good job of doing that. The investment business does a good job of not sharing with you what really goes on behind the curtain. I find ways to help you look behind the curtain.
There are no words to describe this article. Read it for yourself!
The title for this piece was influenced by a lyric in a song written by Graham Nash of Crosby, Stills, Nash & Young. You don’t have to be a fan of classic folk rock to appreciate the message in this essay.