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E-Ticket Ride

Remember the E-ticket ride at Disneyland?  For those that don’t remember, that meant you were going on the best rides in the entire park – the ones that cost your parents the most to buy for each and every ride.  Now we have the fast-pass and you can draw parallels to the E-ticket.

If you used your tickets to go on an E-ticket ride, like Space Mountain, you were in for a real treat.  That was (and to me still is) the best roller-coaster that Disney offers.  Lots of ups. Lots of downs.  You can draw a parallel between Space Mountain and the past three-weeks in the stock market.  This has been one heckuva roller coaster ride – and not in a good way.  While you are most likely screaming on the way down, you know at some point there will be a ramp up to the top again.  Going down may not be a comfortable feeling, but the exhilaration on the way back up is intoxicating -- the same can be said for the stock market.  

We are living through unprecedented times.  Most investors haven’t experienced market situations like this.  Keep the current situation in perspective. Investors are ‘freaked out’ with all of the volatility.  Justifiably so.  Like the roller coaster analogy, this has been a violent market pullback moving quickly.

You can have the best developed investment strategy and the best thought capital that a financial advisor can put into the investment plan.  However, if you can’t control how you behave as an investor during difficult times like this and stick with the plan that was developed, you will not realize the rewards of your plan – either with the income from your portfolio, or the potential growth of your portfolio, or both.

Everyone’s memories vividly recall the financial crisis from 2007-09.  All signs point to this current experience not being a repeat of that time.  However, memories are short. One can only remember the good times -- that being the 10+ year bull market we experienced before the correction that occurred in the past three weeks.  

Before any investment decisions are made, it is important to get a fresh look at your investment plan and other financial plans, including insurance (life, long-term care, disability and health). For investors who have income plans and are actively using their investment portfolio for income, it’s a good time to revisit your income needs and budgets.  Confirm your cash needs and ensure that you have your budget and emergency funds in place.  This is vitally important for investors who are using their portfolios to generate their monthly retirement income.  

Make sure that your portfolio is designed to allow you to live off your investment income and not on the growth or principal portion.  This is important to understand as you ride this market roller coaster. It means that your income investments will generate income for you based on how many shares you own, not on their current market value. And if you are not taking income, then the income could be reinvested and increase your shares by purchasing new shares at a lower price in a market decline.  Although your portfolio value will decrease during a market correction, you will not need to sell your shares to provide the income that you need.  If you choose to sell shares if you need additional funds, it will be up to you. We call this type of plan “Reality-Based Investing.”

So, with your E-ticket in hand and as the old adage says, “get comfortable with being uncomfortable.”  This view could lead to an opportunistically ideal way to invest in quality investments for potential growth and reliable income purposes using our “Reality-Based Investment” strategy.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.