Common Sense Investing:Market Cycles mean that Portfolio Holdings Must Change over Time
Markets move in cycles and trends with sectors of markets, or classes, representing similar types of investments. Different asset classes move in different cycles and at any one time some assets may be in upward trends while others are in downward trends. Put it all together, and we see the larger market move up and down as investors react to news and economic activity. When markets go up, everyone is happy. But when markets go down, as they sometimes do, investors lose money.
The legendary investor Warren Buffet created two primary rules of investing:
Rule #1 do not lose money.
Rule #2 is to pay attention to rule #1.
At Cenacle we direct our portfolios toward the classes that have the potential to gain while avoiding assets that lack promise. We do not invest according to a rules-based model... beyond Buffet’s Rules. It’s just Common Sense.
Here’s the math, when investments lose 30% in a market reversal, it doesn’t take a rebound of 30% to regain your money . . . it takes a 60% return. If markets go down 50%, as they did in 2008, you must gain 100% of your remaining funds just to breakeven. The cost of losses can be devastating, both in the time required to recoup the losses, but the lost time while recouping those losses. Regaining what you once had can take years, and even decades. For Trusts and Endowments that took years to accumulate funds, losing years to get back to “even” is simply poor shepherding.
At Cenacle we use indicators and analysis to avoid losing asset classes and to minimize losses when markets are turning against investors. We understand that markets do not go up forever and stand ready to protect profits, not afraid to sell holdings and move to cash, while waiting to re-invest when the growth line returns. We use Common Sense.
If you invest in the financial markets, you need to have measures in place to protect your investment capital from significant losses.
At Calyx we minimize losses when market cycles turn against investors. The difference between managing to the cycle and simply putting money into funds and hoping for the best is significant.
Ed, Branson & Claudia
At Cenacle, we help families and foundations protect and manage their financial resources. We are a financial advisor and investment manager that partners with our clients to administer their financial affairs with personal attention and active risk management. Cenacle is also advisor to charitable trusts and endowments, working with committees of faith-based organizations to preserve their legacy while providing operating income. We are sensitive to the investment needs of these clients while working within the guidelines they have established to reflect their principles.
