Be Strategic and Tacical, but Don’t Be Fearful

By Branden DuCharme

There is currently a lot of pessimism, concern, and fear in the average consumer, worker, or investor—perhaps for good reason. 2022 was the first time in history that, broadly speaking, both stocks and bonds were down more than 10 percent at the same time. Inflation has been soaring at over 8 percent, with the more volatile (yet more applicable to retirees) measures of food inflation at over 11 percent and energy inflation at over 23 percent.

This means that many people have seen what traditionally should be their defensive investments (bonds) decay at a similar rate to what is traditionally their offensive investments (stocks) at a time when their costs are going up. This makes it more difficult for those approaching sixty-five to navigate a retirement plan and for those in retirement to remain there.

As a result, many people are looking for alternative places to move their investments. It’s not uncommon for me to hear prospective clients say, “I need to do something before it’s all gone.” It is a real fear that many people are facing.

I like to caution folks that it is okay to be aware, but making fear-based decisions, especially fear-based financial decisions, can be disastrous over time. Emotion is not something you want near investments, although, to a certain degree, it always will be. It would behoove all investors to put a hard check on allowing fear near their financial decisions.

Fear is currently driving folks to look for alternatives. They find feelings of safety in places that sometimes use the word “guarantee” and offer little to no risk (often, annuities and CDs). Although there is nothing inherently wrong with these types of products, they should be a need-driven and not a fear-based change. When looking at annuities with my clients, I try to educate them about the opportunity cost and the potential liquidity constraints.

Annuities often carry a significant surrender charge, similar to a cancellation fee. This means you can’t always easily access your money. Additionally, if inflation continues to run at a high rate or the market shifts and starts producing significant gains, your annuities often have no way to capture the changing market conditions, and the results of the annuity may not meet your long-term goals.

If you feel the need to make a change with your strategy but it seems like alternatives don’t make a lot of sense, consider looking at tactical management with your investments. It allows for reduced risk with an exit from the current market conditions but with a quantitative strategy of how and when to reenter the market based upon changing conditions.

A way to help you understand if a product or service is a good fit is to start with your “why.” Peel back the layers of your financial plan and look at why you are doing any of it. What are your goals? After identifying these goals, look at strategies that may help you accomplish them. If a certain type of product or service is a good fit, explore specific product options that fit the strategy, which is driven by your needs, a product of your “why.”

Changes to current buy-and-hold investing in this market can be productive, but they come with their own sets of risks. Think holistically prior to making major changes, and consult with your own personal fiduciary financial advisor. Fiduciaries are legally obliged to work in your best interest, helping you to find clairvoyance of thought. They should help you avoid fear-based decisions and instead, make strategic and perhaps even tactical decisions.

About the Author

Branden DuCharme

Branden DuCharme is an investment adviser representative with GVCM, a SEC registered investment advisory firm.

Advisory services offered through Global View Capital Management, Ltd. (GVCM). GVCM is a SEC Registered Investment Advisory Firm headquartered at N14 W23833 Stone Ridge Dr-Suite 350, Waukesha, WI 53188. Branden DuCharme is an Investment Advisor Representative with GVCM. GVCM is affiliated with Global View Capital Advisors. Supervising office 262-650-1030. Local office 435-220 -4930. Additional information can be found at: https://www.advisorinfo.sec.gov/IAPD/