Accounting For The Down Side

It has been a year and a half since my last blog post. I finally feel as if I can get my head above water from the distractions, stress and challenges that arose from the dumpster fire that was 2020 and early 2021. The remainder of 2021 looks positive and I have planned to post regularly on the topics that resonate with my life experiences. The first topic will be "Accounting for the down side", a look at investing with a thoughtful and appreciative approach.

Accounting for "all the things" lives rent free in my brain 24/7. The scenarios that get the most play time revolve around the idea of accounting for (limiting) the down side. This is a commonly thought of as a hedge in investing but the theory can also be applied to daily life scenarios. Challenges(opportunities) present themselves at every turn. Determining how to limit a situation from going awry or increasing the potential outcome of a situation is a double edge sword. Both are present but often only one solution can actually be pursued. Choosing which side of the sword to sharpen is an art.

As an investor, the number one rule I live by is "Don't lose money". At first glance this appears to be a very blanket statement but when I view it through the lens of an investor it translates to "Don't lose the initial amount you invest." While prices for most stocks, tangible goods and commodities are pushing all time highs and many investors are reaping the benefits, I can't help but ponder how to hedge against the downside. When times are good and prices are high it is a natural human tendency to worry about what will happen next. Will inflation destroy the value of the almighty dollar? Will the Federal Reserve increase rates at a faster pace? Will prices fall or will they continue to climb over time? The unsettling and increasingly vague reality is that none of us can predict what comes next. An a attempt to control the uncontrollable is a practice of constant disappointment. The thought of missing out on exponential growth vs. the thought of losing the present day increased value of an investment falls right in line with my previous statement. Understanding that missing out on additional upside in order to cap the downside is a dance itself. Selling a portion now to insure profitability and protecting yourself against a potential down turn is prudent. Profiting from an investment should not feel like a burdened choice but instead perceived as a blessing. The opportunity presented itself and the correct choice and assessment was made. Taking comfort in choices that were made with sound thought, theory and execution trump the fear of missing out. Opportunities begat opportunities as long as thankfulness and sound decision making remain at the core of each decision.

Investing is a large part of life. We invest our time, money and our hearts into various avenues. Creating a standard and core thesis to stand by can make all the difference when hard decisions present themselves. The best thing is each of us have the ability to decide what resides in the core of our beliefs.