Takeaway for today: A recession does not necessarily mean the market is going to crash and that good companies are not going to come back. If you know what you’re buying and why you’re buying it, you’ll have a good sense of what companies to invest in if there’s a discount. Also, if you have alternatives that don’t track as the market tracks, they will probably go down but they won’t go down as much.
Handy Cash
Tara Unverzagt, president and senior planner, South Bay Financial Partners
Biggest mistake from the Great Recession: Investing in AIG. I understand insurance fairly well, but didn’t understand what AIG was insuring with collateralized debt obligations, and didn’t do my due diligence. I will live with that mistake forever.
Best move from the dot-com recession: One of my fondest memories was in 1999, a client was going to retire in 2000. His company was moving his 401(k) from one brokerage to another. He needed to let them know how to invest the assets at the new brokerage. This was November 1999 and he was going to retire a few months later. I said, “Just leave it in cash for now. We’ll liquidate it soon anyways. No point in investing it for such a short time.” The crash happened right as he was retiring, and we hadn’t rolled over the funds yet. He kept all his wealth, was able to retire as planned, and bought into cheap valuations. He has passed away since then, but his wife is surviving well with the nest egg to this day.
Takeaway for today: Don’t get caught up in the “the world has changed” narrative. Every time a bubble is happening, that’s exactly the narrative that comes up. “It’s different now; the way we value things is different.” But if it’s too good to be true, it probably is.
Delay Bargain Shopping
Kim Forrest, chief investment officer, Bokeh Capital Partners
Biggest mistake from the Great Recession: I should’ve looked at banks. There were going to be banks that succeeded and there are banks that succeeded. I didn’t even look at that sector and I should have. Look at every sector.
Best move from the Great Recession: I think that not trying to get cheap stocks that were ultimately not cheap was something I did well. I've always wanted growth at a reasonable price. I think that served me well in that recession. Sometimes value people look at balance sheets and think, “Ooh, that looks great” — I more often than not think, “Ooh, that looks mispriced.”
Takeaway for today: In whatever sector gets affected, don’t go bargain shopping too early. Don’t leave what works for you. If you’re a momentum person, play the momentum game — don’t get sucked into playing a different game. You are what you are, you see the world a certain way and you can still make money in any market. There is growth out there. In very rare cases does everything go wrong — it’s usually somewhere in between.
This article was provided by Bloomberg News.