The iconic 1969 hit by Crosby, Stills & Nash could never be more applicable than it is today. The song’s lyrics can be especially applied when speaking of finances – passing on the lessons you’ve learned and teaching kids to make the right decisions that will allow them to achieve their dreams. July 7 is designated as national “Take Your Daughter for a Walk” Day. While I think that the “national day of” thing has started to get a little out of hand, this one strikes straight to my heart as the father of two daughters (Jaren and Jade) who are 17 and 15 years old. This week, the elder is moving to Nashville to chase her dream of being a Christian music artist!

There are certain points in my writing for MCM when I encourage readers to take a second look at the risk in their investment portfolio. By proactively managing equity and interest rate risk, investors may be able to decrease the level of volatility in their portfolio. First, a quick lesson in financial risk definitions:

The financial advising industry has changed dramatically over the past 20 years. When I worked for the country’s second largest brokerage firm back in 2005, we acted as our client’s broker. A broker is an investment professional who has passed their Series 7 licensing exam (as well as other state level exams) and charges a commission when transacting stock orders they recommend to their clients. Back in 2005, there was very limited access to the stock market via the internet. Discount brokerage firms like Scottrade® and E*TRADE® were just starting up. From the early 1900s, the only way to access the stock market was through a brokerage firm. This allowed brokers to charge what are now considered to be very high commissions. I remember buying $20,000 worth of Apple stock for a client and charging them $500 for that one transaction. It was the client’s way of paying for my advice. With the internet and technology advances, discount brokerage firms started to pop up everywhere. They would guarantee $25 commission per trade when no advice from a broker was given. Then, more and more online platforms popped up, the beauty of capitalism kicked in and the race to the bottom on commissions commenced. On October 2, 2019 Charles Schwab announced completely free stock trades and within 24 hours, E*TRADE and TD Ameritrade followed suit. Granted, these platforms are not designed for people who are seeking financial advice and are designed for the “do it yourself” stock traders – not for the faint of heart.

One of our founding fathers, Benjamin Franklin, is famously quoted as declaring, “A penny saved is a penny earned.” In a world driven by marketing and extreme consumerism, many Americans have bought into the lie that having more “stuff” will bring happiness. The newest iPhone, the coolest jeans, tailor-fit brand-name suits and the trendiest shoes are all ways we can imply our status level to the world. Everyone wants to be viewed as successful, and unfortunately, the “fake it until you make it” mentality is causing many to overspend and neglect their savings.

Going into the pandemic in March 2020, many investors (rightfully) questioned whether our national economy would be able to recover. As humans, we are designed with a fight or flight instinct that has preserved our species for thousands of years of recorded history. When it comes to investing, resisting this natural survival instinct is paramount to being successful over the long term.

As I write this, we are just a few days from the inauguration of President Biden and ushering forth the Biden-Harris administration. To say that the past two months have been interesting, politically, would be an understatement. I had hoped that this election would be a landslide (one way or the other) to give us a feel for our country’s temperament; unfortunately, like the election of 2016, it seems to have further driven the wedge of division. As always, I will keep the new administration in my prayers as they attempt to unite our country.

When an event occurs that no one could have predicted nor saw coming that ends up having a significantly negative effect on the stock market, it is often referred to as a “Black Swan Event.” Such events almost always cause massive damage and leave the average investor in a state of fear and panic. The term was made popular by Nassim Taleb, who wrote about these events in his book, “Fooled by Randomness.” In it, he attributes three constant factors that must be maintained in a so-called “Black Swan Event.” They are:

The year 2020 is coming to an end – a year of forced change, unwanted adjustments and re-learning many different aspects of our lives. Americans know how to work hard and we also know how to play hard. In fact, one of the most difficult aspects of the global pandemic has been our inability to do whatever we can afford to do, whenever we want to do it. One of the upsides of the inability to travel and spend money has been that many families who were blessed to stay employed have experienced significant adjustments to their leisure spending. These reduced expenditures have created an opportunity for us to view these unfortunate lifestyle changes as a chance to beef up our retirement savings.

As I write this in mid-October, I am very hopeful that we have had a successful election, and that a peaceful transition of power has been able to take place in Washington. Unfortunately, I put those odds at a slightly less than 50% chance. The results of the election have permeated the thought processes and have been a motivating source of frustration for many investors throughout the second half of 2020. I am writing this article to encourage you – that the markets, although volatile, can handle whomever is elected President of the United States.

Although over 36 million people lost their jobs due to the forced shutdown of America during the COVID-19 crisis, I believe that approximately a third of those jobs have come back. Please don’t listen to politicians who say that we are in the greatest job creation period of our lifetimes – that statement is quite laughable. At best, we are in the greatest job recovery period. The truth of the matter is that we are in a time of complete and utter chaos and fear-mongering.

As we continue to press forward into what I have branded as “the year of uncertainty,” we continue to navigate markets in an environment of extremely high volatility. The volatility index, often referred to as the VIX, or the “fear index” is currently trading at around 30. During normal economic environments, when not dealing with a global health crisis, nationwide shutdowns of certain industries and weird executive orders being implemented on a unilateral basis, the VIX is perfectly happy trading around the 10-12 area. What this indicates is how much investors are willing to pay for protection of their portfolio.

Unfortunately, the last four months have brought quite a bit of turmoil. U.S. unemployment numbers were at a historic, record low of below 4% for 23 consistent months, only to be destroyed by a nationwide stay-at-home order that decimated our workforce. It is estimated that over 36 million people lost their jobs between the end of March and the beginning of June, and our unemployment rate is the worst since the Great Depression.* In fact, the currently horrible economic numbers can only be compared to those experienced during the 1930s.