Reflections on the Fear of Investing
Reflections on the Fear of Investing
I had a recent discussion with a client who shared thoughts with me on why investing is so fearful for so many people.
Everyone has their own unique personal feelings and attitudes on why investing can be scary for them, but this client touched on a few common concerns that prompted me to want to share my response. I am reasonably certain that many can relate to some of these issues listed below.
- Lack of Control: Similar to encountering turbulence when flying an airplane, we are concerned when events that are completely outside of our control start to put us at risk. World events that are entirely unrelated to our lives are suddenly disrupting our portfolios and it creates a lot of anxiety.
- Institutional Failures and Fraud: We know that many financial institutions and the federal government have permitted fraud in the past and in some cases committed practices that failed to protect investor interests. In other cases, investment managers like Bernie Madoff have purposely lied to investors and stolen money. This creates a fair amount of distrust in the entire financial system.
- Lack of Knowledge: Large sums of money that you depend on are invested in ways beyond your ability to research or understand like you might with consumer products or purchasing a house. You wonder what you need to know to be like Hillary Clinton, who turned $1,000 into $100,000 which she made in cattle futures.
Here are my thoughts and how our processes address these areas:
- Lack of Control: Our process to serve our clients relies on building a strong structure around their individual and/or family life. It is from within this structure that our clients make choices and we provide leadership. There is a control to prioritize outcomes and manage risk by accomplishing those things that are important to our clients. Managing uncertainty is the focus to arrive at a client’s pre-determined destination. We do not control the environment or our clients’ values, but we do offer the tools and skill necessary to advise them and guide them through unexpected turbulence. Partnering around a common objective with full disclosure of assets and cash flows is fundamental to client success and building this foundation for decision-making.
- Institutional Failures and Fraud: The Johnston Group LLC is independent and we do not custody or control client assets in any physical way. We use, for client benefit, institutions that provide custody, and direct control of assets to our clients. These clients provide us permission to manage and provide instruction but never cease control of any of their assets. We are committed to use only the strongest and most reliable firms and client money is available at any time.
- Lack of Knowledge: There is always a gap between our knowledge and the future. No one knows what exactly is going to happen next. Anyone who says they know what is going to happen next in the securities markets is either lying or using illegal inside information. My life experience and 38 years of investment experience does not allow me to see the future, but it is a lot of research and development! We strive to reduce variables that we can control that will work against our clients’ success. We use a repeatable qualitative and quantitative analysis with people who are committed to our culture of serving client interests. We leverage outside help where required, we eliminate unnecessary expenses and taxes when possible. Our only business is to focus on our clients and their success in a relationship that always requires us to bring our best knowledge and experience to their situation.
Lastly, a comment on current markets. Volatile price movement and a decline in valuation has occurred in response to a couple of primary concerns: First, a sharp pullback in demand for capital equipment from China and the energy industry. Second, low prices for commodities and energy are slowing the possibility of rising U.S. interest rates. I believe the markets will perform well after this correction because stock prices are back to levels of two years ago and the U.S. economy has a much brighter future now than we did at that time.