The Hardest Thing I Do

November 7, 2016

We each face decisions every day in our work and with our family. Some are easy but others are very difficult. I thought I would share with you what I find to be the hardest decision I face on a daily basis. When do I buy into the market?

Now you might be surprised to hear that, given I have spent my career in the investment field. I first spent seven years as a portfolio manager charged with managing money. In this job I invested capital on a weekly basis based on the portfolio’s needs. I then spent the next 25 years working on Wall Street where trading sometimes occurred multiple times a minute.

I have learned, however, that trading is not investing. During the last eight years I have had to “unlearn” the instinct to trade, and relearn how to invest. Occasionally it is easy to invest. Most of the time it is much harder to discern value and to be bold enough to invest with conviction. We are now in one of those times.

After a long run up in value the markets would appear by most metrics to be at lofty levels. Despite recent price declines US stocks still look richly valued by some measures. The bond markets are at near all time low yields. Yet each day new cash is available to put to work. How can an investor feel comfortable about putting money to work during these market conditions? Should we just wait for more clarity on direction? What if I buy and the market sells off 20% the next day? The risks are real.

For most of my career I managed money for large institutions. If you are managing money for a bank, an insurance company, or a hedge fund, who really suffers if you make a wrong decision? The manager is not putting at risk their own money. The situation for a family feels very different. My client is no longer an anonymous investor that owns shares in the bank or insurance company. Instead it is Bill or Judy or Mike or Nancy that sits across the table as I seek to do my best. I understand fully the benefits of getting it right, and the consequences of getting it wrong. My decisions and counsel can really change lives.

So how can you invest when the market is at an all time high? Grin and bear it does not seem to be the answer. I think the only sensible way is via a careful and thoughtful plan. A disciplined approach to what needs to be done (getting your money put to work) is necessary along with a recognition that you will not be right all the time.

Investing is about taking risks. One of those risks is accepting that there are times you will wish you had waited. Understanding that up front, however, does not make the decisions any less agonizing.

Carl Gambrell