We’re in a period of extreme volatility right now—what I call “whitewater investing.” And whitewater investing calls for whitewater rules.
Rule number three is to work with a team. Calm markets and calm water allow you to work by yourself. But when the water starts to roar you need to have a team you can trust, especially if anything goes wrong. For example, taxes aren’t much of an issue if you can invest and hold on for decades. But when you need to make adjustments in volatile times, tax-planning is critical.
Likewise, custody was an unimportant detail until a little firm named Lehman seized up. Then investors that had accounts with Lehman couldn’t get to their money for weeks. And investors that didn’t pay attention to fine print that allowed advisers to substitute “cash-equivalent” Auction Rate securities got a rude awakening when they couldn’t use their cash. Knowing how the brokers were paid might have helped those investors understand why they owned those bonds.
Teammates matter. Details matter. Motivation matters. Having a team that you can depend upon is critical as you move through turbulent markets.
Douglas R. Tengdin, CFA
Chief Investment Officer
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