The most critical investor attribute

The Coronavirus induced a stock market decline, it represents the fifth major decline I have experienced since I began my career in the financial industry in 1972. Each of the five declines came about for a different reason but they all have certain things in common: 1) They were extreme declines; 35-50% from the previous peak; 2) they were accompanied with much fear and concern; and 3) no one could tell when they would end until after the fact.

The previous four did have an end point and my experience and knowledge of the markets tells me that this one will end as well, it is that timing that is currently unknown.

A primary mantra of the Ballou Family Office is to assist our clients understand the investment process that comes about by participating in the wealth creation process. We understand that risk management is an inherent part of that process and we do our best to make that part our process and guidance. Our belief system is that if you take too much risk you probably will not achieve your required investment returns, concurrently, if you take too little risk you also will not achieve your required returns. Being an investor requires a certain and necessary level of market risk. Accepting certain levels of risk is not always easy, especially when the current news cycle is reporting “worst case scenarios” as if they were uncontested facts.

It is times like these that we feel it important to reaffirm what we believe to be an extremely critical attribute of being in investor. An investor absolutely needs to have an appropriate belief system. A belief system that helps in understanding how wealth is created. Wealth is created on a societal level by the ownership of a growing business over time. I have yet to find or hear of another means by which wealth is created that has led to an unprecedented enhancement of our standard of living over the past 200 years. 

There can always be interruptions to the process; wars being an example. But as long as the human spirit is alive and innovation and thinking is allowed those interruptions will pass. As we continue to work through the current environment, please remember that the market was trading at all-time highs on February 13, 2020. The extreme reaction has been a result of not only the fears associated with COVID-19, but in the decisions that have been made that will affect economic output over the next several weeks. Please know that we are monitoring the situation closely and working diligently with your best interests in mind. If you have any concerns, please feel free to reach out, and we can discuss (in greater detail) our current line of thinking regarding the current events. It is our belief, that like other “extreme” declines, this one too will end. The timing of its conclusion is the part that is unknown at this time. In the meantime, may your belief system be with you and stay safe.

Chuck Ballou
The Ballou Family Office