Rehabbing an Injury from Training

If you experience injury from exercising, a structured rehabilitation process may be recommended to help facilitate your return to training. The rehab process will include gradual exposure to movements and increasing loads to allow for proper recovery and to rebuild the individual’s self-confidence.

It is not uncommon for someone to be hesitant to resume training due to the fear of reinjuring themselves. While there is always a risk of injury when training there are also health risks from ceasing training that can gradually manifest if exercise is not resumed. 

How to Rehab Your Investment Portfolio

If you were invested in the stock market and sold out of a portion, or all, of your investment portfolio and went to cash the idea of reinvesting can seem daunting. Like getting injured while training, the idea of skipping the rehabilitation process and avoiding training can feel more comfortable in the short-term but can carry long-term consequences.  

Cash is Comfortable

Someone who holds an excessively large proportion of their portfolio in cash is similar to someone who lives a sedentary lifestyle. The potential negative consequences of not putting your cash to work do not manifest themselves until many years down the road when inflation has gradually eroded the purchasing power of that cash.

Investing a portion of your portfolio in stocks does carry market risks but the potential risks may be necessary to fund your future goals. Stocks provide the potential of growth above the rate of inflation and can help you maintain the purchasing power of your portfolio over time. 

How to Rehab Your Portfolio

I have provided a “Portfolio Rehab” process to resume stock investing for someone who has been “injured” by the market. This is not specific investment advice, but rather a framework to be applied regardless of your investing preferences and goals. 

Start with Why  

• What is your purpose for investing?
• Is your current portfolio allocated in a manner to allow you to achieve your set purpose?
• If no, further consideration is needed to determine what changes can be made to give you a better chance of achieving your goals. 

Embrace the process  

• There will be ups and downs along the way, as investment returns are never linear.  

Manage expectations  

• Understand that market volatility is always a part of the investing process, and investing can be painful, but “hurt” does not always equal “harm.”
• The goal is to set realistic returns and volatility expectations. 

Return to Investing  

• Gradually and systematically increase your stock exposure until you reach your target allocation.
• Using a systematic process that allows you to reinvest over time helps to remove the emotion from the investing decisions. 

Seek professional help   

• If you are struggling with the idea of investing, having difficulty finding an entry point into the investing process, or have tried to proceed through this process without success, it is reasonable to seek out assistance from a trusted advisor.
• This may involve someone local to you, or the team at Western Reserve Capital Management is happy to help. 

The thought of investing in the stock market can seem intimidating but following a systematic process to begin or resume investing in the stock market can be a useful way to increase your equity exposure over time.

The stock market exposes you to additional risks but when these risks are managed appropriately, it can provide you a greater chance of funding your long-term goals.  

Feel free to email us at info@westernreservecm.com with any questions you have.

Progress is not achieved by luck or accident, but by working on yourself daily.

Epictetus

Trends in Nutrition

In the nutrition space, there is always something new to capture your attention. There are special diets, secret ingredients, or tactics that marketed to the masses in an attempt to get them to purchase something, often at a premium.

Once the initial buzz wears off there is always another new nutritional breakthrough and the marketing cycle repeats. People float from one trend to the next without ever making any lasting progress. Any results they do get are often short-lived or due to other underlying lifestyle changes, they made during that time.

Successful dieting is simple, but far from easy. The boring principles of consistency and hard work are not appealing when there are quick fixes to their issues. Anyone who tells you otherwise may have a vested interest in trying to convince you there are.   

Trends in Investing

A recent entitled Competition for Attention in the ETF Space by Ben-David et al. looked at a similar thing taking place in the investing space, where there were two kinds of exchange-traded funds (ETFs) being released.

Broad-based ETFs that generally hold low-cost, diversified (boring) portfolios and specialized ETFs that offer trendy themes and generally hold less diversified portfolios. The results in the paper suggested the trendy ETFs fail to add value but rather are launched to capitalize on a recent investment theme that has sparked the interest of unsophisticated (small) investors.

The paper stated the buzz around these specialized ETFs soon fades and they are then replaced by a different fund that attempts to capitalize on the next investing fad. Meanwhile, institutional (large) investors tended not to invest in these specialized ETFs but rather choose to invest in the low-cost diversified ETFs (Ben-David et al.).

The “Secret” to Investing

Successful investing like dieting is simple, but far from easy. The uniformed consumer often thinks there is a large amount of skill and specialized knowledge required to be successful. The reality is after learning the fundamental principles of investing, success is more a result of the investing process they follow, their ability to be self-reflective, and learning from their past experiences.

They likely found an approach that works for them and follow it diligently rather than spotting the next big trend and capitalizing on it. Some may consult investment experts for advice, but they do so for guidance on their journey and not for a shortcut to the finish line. 

Attention is a scarce resource and competition is often fierce in investing space. The idea that investing is not meant to be exciting, and you should get “rich” slowly does not create mass appeal. This leads to trendy products being pedaled to the uneducated consumer audience. These products tend to be more expensive and less effective than a less flashy alternative.

Understanding the fundamentals and following an approach that works for you will likely result in more meaningful outcomes than any single product could.

Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.

Life is a matter of choices, and every choice you make makes you

John C. Maxwell

Make Every Bite Count with the Dietary Guidelines

In December 2020 the U.S. Department of Agriculture (USDA) released the Dietary Guidelines for Americans for 2020 – 2025. The dietary guidelines are science-based recommendations to promote health, prevent disease, and meet nutrient needs. The advice they give has remained relatively consistent over time and evolves as scientific knowledge expands.

They emphasize the guidelines are not a rigid set of rules but rather a customizable framework of core elements that allow individuals to make dietary choices that meet their personal preferences, cultural traditions, and budgetary considerations. They highlight the importance of healthy dietary patterns at every stage of life since dietary requirements change as people age. 

The Dietary guidelines encourage individuals to focus on eating primarily whole foods, choosing a variety of options for each food group, and paying attention to the portion size. They also encourage the limiting of foods and beverages higher in added sugars, saturated fat, and sodium (aka junk food.) 

The USDA realizes humans are not robots…and pizza is too good to never eat it again. This is why the guidelines, show you how to incorporate “junk” food in an otherwise health-promoting diet.

Make Every Dollar Count with Investing Guidelines

Just like how dietary guidelines are recommendations for health-promoting dietary patterns, investing guidelines (policy) can be used to provide recommendations for wealth-promoting investment patterns.

These guidelines are not a rigid set of rules but rather a customizable framework of core elements that allow individuals to make investment choices that accommodate their personal circumstances and preferences. Following these predetermined guidelines can help to create wealth-promoting investing patterns for every stage of life.

There is no universal diet, and there is no universal investment portfolio. A portfolio should be constructed base on an individual’s circumstances and focus on investments that can meet their needs while allowing for less efficient investments in limited quantities.

Just like with the dietary recommendations, variety (diversification), and portion size (allocation) are important considerations when implementing a balanced investment approach.

Allowing for Inefficiency

Similar to how the USDA shows you how to fit “junk” food into your diet, it is important to show investors how to incorporate less than ideal investments in an otherwise wealth-promoting portfolio. For some people, this means taking a portion of their portfolio and investing it in more “speculative” investments while for others it’s using that portion and stuffing it under their mattress.

Neither is right or wrong, but rather an outlet that allows someone to leave the core of their portfolio invested in a way that gives them the best chance of meeting their goals. Even if this means your overall portfolio is not the “most efficient” for your situation, having it set up in a way that allows you to handle market volatility and stay invested is far more important.

By using either dietary or investing guidelines you can customize the framework to meet you where you are and develop patterns that will drive positive long-term results. Consistent good decisions, however small they may seem, can make a huge difference when compounded over a lifetime.

Make every bite count, make every dollar count.

Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.

The stock market is a device for transferring money from the impatient to the patient

Warren Buffett

What is Pain?

Everyone experiences pain from time to time. People often view pain as an indication of mechanical damage to an area of the body similar to the damage done to a part of a larger machine. Using this logic, if something “hurts” it always indicates “harm”, and therefore painful activities should be avoided. This isn’t necessarily the case.

Humans are complex organisms and can adapt to almost anything. Recent research has shown the experience of pain is complex and is related to the perception of threat and the need for protection rather than active tissue damage.

The perception of pain can be influenced by numerous “biopsychosocial” factors and the expression of pain can be met with a low level of fear where the individual has high self-efficacy and allow for recovery. 

Or if they instead catastrophize their experience of pain and have a high level of fear, they will have a low self-efficacy. This can cause them to avoid the pain and could inhibit recovery.      

With this in mind, we can view pain as not always as bad (harmful), rather as discomfort we all occasionally must deal with.

Pain in Investing

For many, investing can be seen as a “painful” experience, because you often expose a portion of your portfolio to investments that experience market volatility. When investing you must determine if the pain you are experiencing is indicating harm (damage) or is to be tolerated.

All investing involves risk, often when investing for the long-term you must expose a portion of your portfolio that will be exposed to the volatility of the market. The pain of market volatility may “hurt” but is not “harmful” and should be viewed as a fee you pay when investing in these types of assets.

A Potential Issue with Active Investment Strategies

Active investments’ offer the potential for outperformance relative to their benchmarks. Future outperformance is uncertain and underperformance relative to a benchmark is always a possibility. The use of active management depends on experience, talent, cost, and patience.

When implementing an active investment strategy, there will inevitably be periods where it underperforms its benchmark. The duration and magnitude of the underperformance cannot be known in advance.

This “active-risk” exposes you to a new kind of “pain” and you must ask yourself if the pain you are experiencing is normal or is there actual harm being done?

How to Manage Active-Risk

How much active-risk you are willing to accept should be determined in advance of implementing any active investment strategy. You must ask:

• How much relative underperformance you are willing to accept?
• How long will you allow any underperformance to be sustained?

This way you are not making decisions based on emotions but on pre-determined guidelines.

These pre-determined guidelines help to prevent you from making decisions based on emotions during the inevitable periods of underperformance.

Investing is painful enough on its own. Active management exposes you to a different type of risk and potentially increases the pain you experience. Investing is a means of reaching a desired future state.

It should be used as a way to maintain a certain level of wealth, with the possibility to incrementally increase it over time. Everything has a cost, even if it not currently apparent. There is no risk-free return.

Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.