Be a Bulldog Investor

June 6, 2018

The economy is a moving target that, at times, gets better and, at times, gets worse. As an Investor, it’s important to understand this trend instead of allowing your emotions to control your actions. We don’t encourage people to make daily decisions with their investments. Humans tend to make very poor emotional decisions when it comes to dealing with their finances. Their emotions can often lead to bad choices that cost real dollars. For example, if an investor with $500,000 lost 20% with no exit plan in place, it would cost them $100,000.

So, are you a bull, bear, or bulldog investor?

The Bull
This investor is almost always positive on the stock market, often refusing to acknowledge when the market is going to drop. We hear things like, “I just want to wait until I get back to even,” and, “My statement was up last month! I want to wait and see what happens.” All of us probably have a little bull in us, since most of our parents taught us to focus on the positives in life.

In part, they were right — we should focus on the positive.

Nobody wants to surround themselves with people who focus on the negatives. An investor needs to carefully weigh the positives and negatives going forward. Making “bull” decisions based on the past is like looking in the rear-view mirror to go forward — it should only be done if you want to go backward. When the trend of the economy is negative, reduce the risk. One way to do this is by selling equities and moving money to cash. If things aren’t positive, don’t let emotions get in the way. Know when to exit and take winnings off the table.

The higher the volatility, the more the stock market goes up and down. For the right investor, this could be an opportunity, while for a retiree looking for a smooth ride, volatility can create grey hair. Our economy is much more global today; what happens overseas can lead to problems here in the U.S.

The average investor can’t forecast the stock market, and even the smartest people on Wall Street can’t do this very well, either. Our advice to our readers is to have a predetermined exit plan in place.

The Bear
This investor focuses on the negatives and usually ends up going nowhere. In the investment world, the bear investor tends to keep all of their money in safe fixed accounts. If that money is in a retirement account and an investor is earning ½%, is that really a positive return? Once an investor factors in taxes and inflation, the return is still negative.

The way a bear can win is to learn about other accounts that exist which still provide a level of safety with more upside potential. Consider other alternatives to put the money to work.

The Bulldog
This is the investment approach we recommend. Those who served in the Marine Corps, like Nolan, know this idea very well. For those who didn’t, the bulldog is the beloved animal that symbolizes our ability to adapt, overcome, and conquer.

The approach is pretty simple for an investor: be prepared, calculate the risks, look for ways to win, divide and conquer. When we work with investors, we utilize a T.E.A.M. approach, which means we divide opportunities and threats into four categories: taxes, estate planning, asset protection strategies, and money management. This can make a seemingly impossible task much easier to conquer.

Remember, you can do it — you deserve victory.