Some successful investors figured out ways of making money from the corona pandemic. But when you hear their stories, are you really getting the truth?
Black swans
Economists often talk about “black swans” in the world of investing, meaning events that seem obvious in hindsight but aren’t evident at the time. When the “Wuhan virus” first surfaced in China, some investors may have found ways to make money at the time. But were they really successful investors, or were just lucky this time? Have they regularly predicted major events, and then actually put up their own money to test their investment theory? In all likelihood, the answer is “no.”
We may be good retrospective investors, but what seems obvious now was simply not at all obvious then. Don’t feel bad that you didn’t avoid the market’s drop or make money from the rebound. Instead, think about what to do next time. But wait! How can you know what the next black swan event will be? You can try to figure it out, look around, read the news, and research the internet from end to end. Ultimately, though, you probably cannot accurately predict what will happen.
What’s the truth?
The truth is that you can try to outsmart the market, and there’s nothing wrong trying. However, it’s much more important to make sure that your portfolio is prepared for the unexpected. In other words, consider what events could happen and how you would respond. For example, with corona, a lot of people lost their jobs and they didn’t have an emergency fund. If they had put aside six to twelve months’ worth of living expenses, the shake-up caused by corona would have been much more manageable.
Dissect your portfolio
When reviewing your financial accounts, consider how each section would respond to a crisis. For assets that you’ll need in the near-term, and especially your emergency fund, make sure they are relatively liquid and safe. To get a professional portfolio review, contact my office and we’ll be happy to see if we can help you find the truth of your portfolio (02-624-2788).
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published March 25, 2021.