By Nicholas Hamner
Investment Advisor Representative
[email protected]
Last week marked 12 years since I joined Franklin Retirement Solutions. I think I was employee number six. Maybe seven. Which feels weird to write considering we’re now a staff of 15. We’ve grown a lot since then! Good thing nothing significant has changed in the world since 2014…
Since we’re reminiscing, remember when you were a kid and went bowling the first time? They’d put the old carpet cores in the gutters (or raise the rails if they were fancy) and… you were a natural! Call the PBA and tell them you were coming! Now, remember the first time you bowled without the rails? You were never as good as the rails made you seem and that first taste of reality was bitter.
Investing in a bull market is like bowling with the rails up. A rising market makes it harder to spot mistakes.
Buying a stock high after a big jump can create issues, but a rising market can validate your overspend. Buying based on headlines, tips, and FOMO is aggressive and emotional, but in a hot market you—and everybody else doing it—can look like a genius.
But can you see that the rails are up?
It’s hard to separate skill from circumstance. Do you have a sound investment strategy or did a rising market hide your mistakes? Do you have the metrics or humility necessary to distinguish what was skill and what was luck?
Understand that I’m not saying investing in a bull market is automatically a mistake. Markets can continue rising for a long time, and waiting to invest in a downturn can create its own problems. The issue isn’t whether you invested while prices were going up. The issue is whether recent success convinced you to take risks you wouldn’t have chosen otherwise.
And it’s important to know that because, eventually, market conditions change. I’m not saying there’s a recession tomorrow. But we have short memories. We all need to remember that a market can’t grow forever and there will be times where the market is down.
And when the rails are down, you can end up in the gutter. That is unfortunately when investors learn their portfolio was relying on favorable conditions rather than a carefully considered plan. Investments that felt reasonable during a long climb can feel very different when values fall and withdrawals still have to be made.
This is why a strong market can be a useful time to review your strategy. Nobody has a clear head when they’re losing money. Use a bull market to evaluate your allocations, revisit your time horizon, determine (or redetermine) how much money you’ll need and when you’ll need it, and distinguish how much volatility you can realistically tolerate.
The goal isn’t to bowl a perfect game. That’s hard. Your goal is to make sure you can roll a good game even if the rails come down.
Give us a call. Let’s put a game plan together.