Blue Line Investing, Article 1 of 12
Have you ever been told that based on your age you should make certain investment decisions? For instance, if you are younger, have you been told you should take as much risk as you can since you have a long time before you need to use that money? Or, if you are older, have you been told you should take less risk since you don’t have time to recover from a stock market decline? If you have personally experienced this during your lifetime, we believe you should ask yourself whether this is logical or illogical advice?
History has shown that stock markets typically go through 3 primary trends at different points in time, and these trends can last from several quarters to multiple years. The trends are typically called Positive, Neutral (or Consolidating), and Negative. An example of a Positive primary trend would be the U.S. stock market from the mid-to-late 1990’s where prices rose steadily for about 5 years. An example of a Neutral/Consolidating primary trend would be the U.S. stock market from the mid 1960’s through the early 1980’s where the stock market failed to make new highs for over 15 years. And an example of a Negative primary trend would be the U.S. stock market from 2000 into early 2003 where prices primarily declined for over 3 years.
Consider, for instance, the stock market rally during the late 1990’s. If you were older, and someone recommended in 1995 you take less risk because of your age, you may have missed out on additional profits by being too conservative when the stock market was suggesting higher prices may be forthcoming. And this could have been at a time in your life when you had amassed a good sum of money during your working lifetime. Likewise, consider the stock market decline in the early 2000’s. If you were younger should you have participated in the losses just because of the logic “you can afford to” or “time is on your side?” We believe the answer should be a resounding “No!“
Since the stock market does not revolve around us as individuals, then why should we make investment decisions as if it did? We believe considering another option could be advantageous: centering investment decisions around a process that focuses on one constant – the stock market itself – and whether it is perceived as either attractive or unattractive for investment based partly on the 3 primary trends.
In our next article we will begin to explore what we believe could be a better way to approach investing, especially from the context of TIME.
Disclaimer:
Advisory services offered through Gordon Asset Management, LLC (GAM). GAM is an SEC-registered investment adviser. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (866) 216-1920. The principal office of GAM is located at 1007 Slater Road, Suite 200, Durham, North Carolina, 27703. Past performance is not indicative of future results. This material is intended for educational purposes only and is not financial advice or an offer to buy or sell any product. The investment strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. The opinions expressed are those of Blue Line Investing and are not necessarily those of Gordon Asset Management, LLC and are subject to change without notice. Blue Line Investing reserves the right to modify its current investment strategies based on changing market dynamics or client needs.
