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Sugar Rushing into Danger

Published by: Nathan Smith Date: November 11, 2017

Another successful Halloween has come to pass.  Pumpkins were carved, a hay ride through my neighborhood took place, and most importantly there is enough candy leftover to bribe my kids well into the Easter holiday.  Good fun was had by everyone although the event had a minor injury.  Our Halloween always start out the same by laying out the rules for our children: follow the paths to the houses, don’t run through the neighbor’s yard, be mindful of cars and others, and have fun.    About ten houses into the tour of my neighborhood, my son said “Dad, why can’t we run through the yards for candy, it takes longer to get to the houses?”  I told him that it was for his own protection, and that he would be sorry if he tripped and spilled all of his candy.

No sooner had I told him that, I heard screaming and crying from the last house that we left, and I see my daughter crying in the middle of their yard with a big scrape on her face.   While I didn’t witness it personally, my wife told me later that it was an epic wipeout.  Feeling the rush of sugar from all of the candy, she decided to leave the safety of the path and tripped on a tree stump.  After that, I didn’t have to remind my kids to stay out of yards.  My daughter, with the pain still fresh in her face, and my son who witnessed it, were very aware of their surroundings for the remainder of the night.  I know next year that I will need to repeat the same exercise, but I guess eventually they will learn, one way or the other.

Investors watching the financial markets this year are experiencing the same kind of sugar rush.  Turn on the news or read on the internet and you can hear about the market making new all-time highs, consumer confidence at record levels, unemployment at record lows,  and the economic outlook has never looking brighter.  The reality of course is much different, and for anyone that has eaten too much Halloween candy like I did, you know that eventually the euphoria from the sugar wears off and you get the sugar crash.  That’s not to say that I think that the market is going to crash, but the expectation from investors shouldn’t be that this market is without risk, and that the good times will continue to roll forever.  The important point here is that just like my daughter, investors that wander off the path of successful investing are taking the chance of tripping and spilling all of their hard earned dollars into the neighbors’ yard.

Wandering off the path of successful investing could be to engaging in following tricks in your portfolio:

  • Timing the market- trying to buy and sell at the right time to maximize returns
  • Concentrated positions- choosing to hold a large percentage of your net worth in one investment
  • Poor risk management- not knowing how much risk you can afford to take in the market
  • Not keeping an eye on cost- investing in funds that charge above average fees
  •  

Advisors at Rather & Kittrell help keep our clients from using tricks associated with investing and trading by helping establish a sound financial plan that works for their retirement goals and needs.  Keeping our clients on the right financial path will help them to enjoy many treats in their retirement years.

Nathan Smith is Portfolio Manager at Rather&Kittrell, and can be reached by email at nsmith@rkcapital.com.