What Will We Do When...?

Hello everyone, and welcome back to this month's edition of The Big Question. This month's topic is all about mindset and preparation: what will we do during the next major market downturn? And I'm not talking about 10% or even 20%, I'm talking about the next downturn that takes the market down 30% or 40% or more, the scary ones, the ones that are packed with uncertainty and leave many people uttering the infamous ‘this time is different,’ often unfortunately right before moving all of their investments to cash or bonds, abandoning their disciplined long-term investment strategy. That's the exact opposite of how you want to react in these moments.

So, understanding what we won't do, let me tell you what we will do. We will embrace it, we will put it to our advantage, and we will be prepared. And yes, I know that last statement sounds a little clichéd, but that isn't the type of preparation that I'm alluding to. The preparation that I'm referring to is what we are doing today, right now. Part of this comes from our rebalancing strategy, which ensures that we're consistently moving out of areas that are relatively expensive and shifting those dollars into other areas that are relatively inexpensive, consistently buying low and selling high. And part of this comes from reviewing and refreshing your financial plan, creating something that we can work back to during times of great uncertainty.

But lastly, a huge part of this is a mental exercise, sometimes what we call a lifeboat drill, that we go through periodically, and it feels especially important to complete during times when everything seems to be going so well. It simply starts by asking yourself a few key questions: how would I feel, react, and behave if my portfolio was down 30%? And with that in mind, how do I feel about my current strategy, my asset allocation, and my spending habits? While it is often easier to confirm and say yes, I still feel great about all this while the market is roaring, I want you to take a moment and really visualize this. Look at your investment portfolio, look at your overall balance, your total dollars. Now reduce it by 30%. What is that new number? How does that make you feel? What thoughts are now going through your head? What concerns do you have in general, but also as it relates to maintaining your current lifestyle? What adjustments, if any, would we need to make?

Now, what's the point of this? To simply work through a fear-mongering exercise? Absolutely not. It is to provide ourselves, you and your team at Presilium, with the opportunity to think about this now, to talk about this now, to work through this now, when everything is a bit more comfortable, when the sky isn't falling and we are not heading directly into the moment of maximum uncertainty, so we can determine how we will work together to get through this uncertainty, much as we have before, and much like we will have to again.

One thing that I can tell you right now is who we will be for you. We will be there as a sounding board, we will be there as a steady hand throughout the uncertainty and the noise, and we will continue to maintain our disciplined investment strategy and our approach throughout. We'll encourage you to not only remain invested, but to forge ahead, buying larger and larger quantities of these amazing companies, not stocks, but the best companies in the world, taking advantage of their temporary declines with the understanding that human ingenuity and optimism will once again prevail. Thanks again for joining me everyone, until next month.