In late February I was on the phone with my uncle Jim. We were discussing economics, politics, history and ranch management. Global asset prices (and I mean ALL asset prices) were valued at 50% of what they had been valued the previous year. People were convinced that we were slipping into the next Great Depression. In one of the darkest moments in post World War II economic history, my uncle me asked this question: “Do you want to know how to make a small fortune?”
“Well, sure I do!”
“Todd, the secret is this: first, you gotta start out with a large fortune!”
Thankfully, financial markets have stabilized and healed significantly since March 9. Large fortunes that had become small have become large again, although not quite as large as they were a year ago. But time heals all wounds and I am confident that we will see a return of global economic expansion and that the market will make up its lost ground and then some.
The folks that made a small fortune out of a large fortune were the ones that went to cash in anticipation of jumping back in before the market rebounded. They will likely never recover from that decision. I know how hard it is to stay the course and maintain discipline when the entire world is losing its mind. Sometimes the desire to do something, anything, to stop the pain seems like the only reasonable thing to do.
Everyone suffered in the global financial meltdown. There was nowhere to hide. Our wealth management discipline was to turtle up and ride out the storm. It was painful and stressful but it appears to have been the prudent thing to do. This is how we survived the last bear market and our clients are participating fully in the stock market recovery, just as they did earlier this decade.
Design a prudent asset allocation and populate it with solid components and your fortune will gradually grow. Don’t lose long term perspective. Frequent trading and market-timing is the surest way to make a small fortune out of a large fortune.