Of Potholes and Portfolios

It’s pothole season. Is your portfolio ready?

As mud season comes to a close in New Hampshire we have to deal with pot-holed roads. How we deal with them says a lot about who we are.

Some folks cruise blithely through, figuring that their cars’ shocks can handle the bumps. That’s fine as long as long as they have strong stomachs. Some of the indentations I’ve seen could swallow a John Deere tractor! Others slow significantly, and pick their way through, steering clear of the biggest ruts. That’s fine as long as you don’t need the momentum to get through the mud.

Still others seem to cruise moderately through, but they seem to have found the perfect speed to maximize effect of the holes. My physics-major daughter tells me that they’ve found the resonance frequency that does maximum damage.

It’s like this in investing. If you see rough sledding ahead, you can just cruise through, riding down and riding back up—if you have the stomach for it. Or you can raise cash, lowering your expected return in the short run in exchange for the peace-of-mind that comes from having dry powder to use in a downturn. That’s the go-slow approach. But you really don’t want to be bounced around by the ruts, selling at the bottom and buying back in at the top. That’s a sure way to ruin your suspension.

I’ve said before how we may be in for a bumpy ride ahead. For many folks, it’s time to prepare for pothole season.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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