Issue 31.17
Wall Street can be a difficult place to understand, and those who work on Wall Street can be equally cryptic. Over the years I’ve watched numerous movies about Wall Street and heard many quotes and sayings that made no sense to me. As I researched the quotes, I found that Wall Street has its own language. For example, “Hunting elephants” means that you’re looking for big deals. And “what is your schedule this weekend?” is another way for a boss to tell his employee that they are working the weekend.
Most Wall Street sayings are slang and have no meaning for the rest of us except in books and movies. However, one of my favorite sayings teaches a valuable lesson. The saying goes: “don’t mistake brains for a bull market”. Now we all know that a bull market is a time when things are good and everyone is making money. This saying suggests that even a complete novice that knows absolutely nothing can make money when times are good. We’ve all overheard the guy in the room who has been making a killing on a particular investment and is all of the sudden an expert.
The unfortunate truth is that we never hear what happens to that guy when the good times come to an end. Often, we don’t see an expert’s value until it’s too late. That is why managing risk is such an important part to managing any investment. To illustrate, if an investment goes down by 50%, it requires a 100% return just to break even. Whereas, an investment that goes down by 10% only requires an 11% return to break even. As you look at investment options, don’t forget that downside risk protection is equally important as the upside potential. And a good financial advisor can help you understand and mitigate that risk.
Mitch is an investment advisor for Heaton Financial, PC.
Contact Mitch to schedule a FREE financial risk analysis 435-272- 4362.