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Why Make Kids Play Outside When It’s Stormy and Raining?


I can just hear all of our readers this month saying, “Here Kagel goes again with his cute little headline.” Those of you who are regular readers know that I always attempt to come up with an unusual headline angle just to create enough curiosity so that you’ll begin to read the article. It’s OK; go ahead and admit it. Your curiosity does get the best of you, doesn’t it? If you’ve read even this far you have done so at least in part because you wonder what in the heck your kids playing out in the rain has to do with money and investing, right?

Here is the deal: Forcing your kids to play out in the stormy weather (imagine the thunder and lightning and the hard rain and wind) is very much like leaving your money in the stock market when the market is extremely volatile and trending down.  Just as it is simply a matter of common sense that your children would seek the safety, comfort and warmth of your home during bad weather, it is common sense that you should seek safety and comfort for your money and investments when the market is “stormy.” 

Like many things, that is easy to say and harder to actually do. It’s not quite so clear and easy to determine exactly when the “market storm” is going to begin and how long it’s going to last. But, I have great news for you!  There are strategies available today that are designed to select those areas of the market that are likely to “outperform” and to select those areas of the market that are likely to “underperform.” In technical terms this is called Tactical Management. Passive Management refers to the old idea of buying and holding as opposed to Tactical Management that involves some method of determining frequently and on a regular basis what “the climate” of the market is. In other words, it’s kind of like a weather forecast. I know we all tease the weatherman because he’s not 100 percent accurate, but we’d all have to admit that there have been tremendous technological advances and improvements in recent years that have resulted in far more accurate forecasts and predictions when it comes to the weather.

Much the same thing has happened in the world of investing. There have been tremendous technological advances in recent years that have resulted in far more accurate market forecasts and predictions. Now, before you just shrug this off, let me remind you that just a small improvement in  identifying a market trend can “stack the odds” in your favor and can potentially make a big difference in your final investment results.

Am I implying that future results are guaranteed? No, I am not. Am I suggesting that there is a foolproof method that guarantees winners 100 percent of the time in any kind of market over any period of time? No, I am not. Am I suggesting that this strategy is right for everyone? No, I am not.

What I am suggesting is that there are strategies available today built on these ideas of identifying market trends that have proven to be effective enough that investors should at least know about them.

In my professional opinion, what I’ve just described would be appropriate for some people for a portion of one’s money. At the same time, we subscribe to the idea that a portion of one’s money should be in more secure and guaranteed investments. Investing models include room for both money at risk and for money not exposed to stock market risk. As far as the money at risk, the risk by itself is not really the problem. It’s more important to focus on how you manage the risk. Simply buying and holding onto your mutual funds and stocks utilizes no risk management whatsoever. You as an investor are going to be 100 percent invested at all times regardless. With this approach the investor is going to get “all the ups” and “all the downs” of the market. We refer to this as “the Wall Street roller coaster.”

Tactical management is just the opposite of buy and hold in that a professional money manager is watching over your account on a daily basis and is adjusting the holdings inside your account as dictated by the market signals used in the Tactical Management model. This is not market timing or day-trading! It’s a bit difficult to explain in a limited space, but I wanted to at least give you some of the concepts and theories that are designed to do a better job of managing risk than what’s been available in the past. I’d like to show you how to take the same common sense approach with your money that you do with your children when the weather is bad. You protect your children from bad weather and  storms; doesn’t it make sense to try to protect your money and investments from “market storms” when they hit?

To find out more about an investing model that  could be a great benefit to you, please reach Dennis Kagel at 309-454-9171 to schedule a no-cost and no-obligation visit.

Photo credit: somethingway/iStock