Time and Patience Are Your Portfolio’s Best Friend
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Time for a portfolio fire drill. Last week, earlier last week, we talked about risk and one’s portfolio managing one’s risk. And you never, ever, ever want risk to lead to ruin. Over to Thanksgiving holiday, got to see a lot of.
friends and met a lot of new people and there everyone’s picking Markowski’s brain about this investment and that investment in crypto and a myriad of different things. again, I, everyone looking for some sort of cookie cutter type of answer and everyone’s situation. And I try to present this again, again, everyone is unique and different. Everyone’s risk tolerance is different.
And I’ve talked about the Talib philosophy, the barbell idea where you have this is for people that are in retirement or getting close to retirement, where you have safe assets on both sides. And then you have in the middle some of the things you can speculate with. It was funny. Right before Thanksgiving, I did a it was like Fox News radio had me on to talk.
about this and the usual question from, you know, an anchor, know, what is gonna be great? Trump’s coming in, what is gonna be a great investment for 2025?
Again, she gave me the opportunity to actually explain. It’s different. And I gave the example, I said, what if you’re young? You could be young and you wanna put money away. But what if you’re also at the same time saving money for a house? And you wanna buy a house in a year and you’re looking to add to that down payment?
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Should you take that money and put it into crypto? Should you put it into the stock market? Do you want to buy a house in a year? Or should you have it in cash and cash equivalents? You eliminate the effects of black swans and tail risk when you put time on your side. And that’s what people just, they fail to get their arms around. There’s so many different factors are involved in how you should construct a portfolio.
That’s why there’s no two portfolios at Markowski Investments that look alike. Ten years ago, I described this as almost like a fire drill concept. remember back in school when you’d be sitting in class and all of a sudden, you’d be excited if you get you to escape from a test. But I was in upstate New York. Sometimes that fire drill would take us out in the cold.
again, I get it, you know, I get it, you know, get to prepare the school in case the brick school building caught fire. Whatever, whatever. you need to do the same type of thing. It’s about a portfolio fire drill. What if
What if something happens? What if there is a market event, a political event that would send the stock market into a massive tailspin?
Like Covid. Now, again, the financial crisis wasn’t wasn’t a black swan because we saw it coming. Or it could be anything, any any sort of disconnect. Something might happen. War break, whatever it may be. Now, if that were to happen, I’ll use myself as a guinea pig in this. If that were to happen to me. I don’t care. I’m going to be honest, it’s not.
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going to matter. I’m not worried about that black squander that tail risk at this point in time, because my time frame for the money that I’m putting away and saving my portfolio is. I’m not going to be touching it anytime soon. But do I have a portion of my funds in cash? Sure. Absolutely.
Absolutely, we do. There’s no doubt about it. If you were someone that is going to need to access your funds to live on, you don’t want to go to your portfolio, especially when it’s downed and say, what what do I have to sell to pay bills? Never, never, never, never, never. That’s not something you want to do.
And again, this is all about managing risk. You know what ballpark, what your bills are over the course of the month. You know what money you want to have discretion, the things you like to do. Don’t you think that there should be a period of time, period of time where you have that dollar amount in cash and cash equivalents. You don’t have to worry about those bills or
You know, you could take advantage. The markets go down. You might be able to reallocate and get some more things on the on the cheap, which is a great thing to do. Again, this is this is what a portfolio fire drill is all about. The thing that I see that many people do is they’re like, well, I’m planning on retiring in a year or two, and I need to have access to that portfolio. And they’re trying to make as much
as possible up until that point in time. you’re getting close to that point in time. You have to start shifting assets into cash and cash equivalents. A good example of this, again, I’ll use myself as a guinea pig. Since my kids have been born, I’ve been saving money for their college education. Okay, I got one down. One down very, very shortly here as a senior in college.
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but I’ve got three kids in college all at the same time. None, not a dime of their college money is in stocks. Not a dime. Why? Well, guess what? I have to have access to that money. I’m gonna have to pay bills over the next three and a half years now. My youngest one is a freshman. Something goes, hey, wire, okay, I don’t want their college fund.
to be down in the dumps because the market for that period of time is. It’s gonna recover, it’s gonna turn around. But this is where time is important. Very important people when you’re constructing portfolios. Again, you have to be honest about your situation, be honest about where you’re at. And again, I get it, I get it. I wanna make that little bit of extra money before I retire. Well, you know what? Conduct that portfolio fire drill and basically see what would happen if.
Something bad, a black swan, something out of nowhere. Watchdog on wallstreet.com.
