Many people ask me about investing in the stock market. I tell them, do I know where the Dow will be tomorrow? The answer is, of course not – but then, neither does Warren Buffet. Here is what I do know: Inflation and the Feds raising interest rates have caused turmoil in our IRAs and financial portfolios. It’s unsettling to see a financial statement that is 15% off its high for a conservative portfolio and even more for a Nasdaq high-tech portfolio. There’s a natural feeling of uneasiness and financial concern. We get seasick.
We have seen the markets
correct over the last year, b”H, and
the markets had a very positive 2023. As interest rates begin to come down,
bonds and the markets should hopefully do well. Gold just hit an all-time high
at over $2,100 per ounce, and Bitcoin has made a healthy recovery as of late.
Real estate, especially office space rentals and shopping centers, have had a
rough time coming out of Covid. There is a lesson here to be learned. Come
aboard and listen to my advice.
A Sturdy Ship
Sailing on a ship
makes for a good metaphor. You start out in balmy weather, but sometimes you
hit stormy and rough seas. Would you jump into the water? Of course not. You
would ride out the storm and wait for the sea to calm down. The important thing
is that your ship be strong enough to withstand the huge waves. Will it sink or
keep you afloat?
Your
portfolio is similar. You never want to walk the plank! Your portfolio needs to
be comprised of high-quality investments, well-diversified, to withstand the
tremendous storms of financial ups and downs. Here is the foundation for strong
portfolio:
·
Be diversified. Put dollars into many types of
investment. Never put all your eggs in one basket! Diversification is your
lifeboat and life preserver vest that protect you and your financial status.
·
Carry insurance. Health, life, property, and disability
insurance are all very important.
·
Purchase a home that you can afford in a good
location and with a mortgage you can handle.
·
Do not get into debt, especially with credit cards.
·
Have ample liquidity.
Keep enough cash on
hand to protect you from having to sell when markets are low. You never want to
be forced to sell!
·
Get a knowledgeable
financial advisor, who
can navigate through both quiet and stormy seas.
·
Buy quality stocks
and bonds and invest in real estate. Allocation is based on your age, overall financial
situation, job security, and risk factors that a financial expert can help you
determine.
·
Construct a
comprehensive, long-term financial plan with the help of your advisor – and stay the course! Remember,
you are the captain. You set the direction of your compass, and you have the
discipline to survive the strong winds of financial ups and downs. Over time,
you should do well.
·
Avoid sales pitches
guaranteeing unreasonable returns. That’s gambling!
If
you follow these simple rules, you should be fine. Remember: The sun will come out
tomorrow, or some day in the future. Calmer seas lie ahead! Never panic, and you
will land safely and dock the ship. Docking is retirement, where you want to be
anchored and secure no matter what winds are blowing. The anchor is enough
capital, keeping you completely secure in any financial storm.
Choosing an Advisor
Always
be aware of pirates in the financial world. Financial pirates do not wear eye
patches or have a bird resting on their shoulders. They are brokers more
concerned about commissions than a client’s financial wellbeing. Be very
careful when choosing a broker; you need a broker you can trust, who has a good
record of success. Especially for large portfolios, a financial advisor needs
to be an independent, strictly fee-based advisor who is not selling any
financial product or collecting commissions. If you do well, the financial
advisor also does well as you pay a percentage of the assets he or she manages.
Over time, you can compare your rates of return to the market’s returns. Your
returns should at least mirror the market’s returns yearly.
You
want an advisor who communicates regularly and explains everything in simple,
easy-to-understand language – one whom you have confidence in and who has
experienced ups and downs over the years. To advise properly, he or she needs
to get an entire picture of your life: your entire financial portfolio, your
income and expenses, your years to retirement, your lifestyle, and your insurance
needs.
An
advisor needs to help you with estate planning: writing a will and health
directives. The advisor also needs to know your risk tolerance, so you can get
a good night’s sleep. You should have a knowledgeable insurance agent and a
competent attorney to work with your advisor. They are the crew working
together to keep the ship steady. Husband and wife need to be involved as well.
At
the end of the day, work hard and remember that success comes from G-d. It is
He Who determines your wealth. G-d entrusts us with money. How we handle it is
our job. So, be charitable and share the wealth. Hashem rewards those who share
their wealth. The Hebrew term for giving is nassan.
That’s a palindrome. Forward and backward, it is spelled the same. If one gives,
Hashem returns the generosity.
Of
course, the best investment you can make is giving tzedaka (charity); that mitzva has the highest returns. Here in
Baltimore, the Ahavas Yisrael Charity Fund should be at the top of your tzedaka giving. Aniyei ha’ir (the poor of one’s town) are the top priority in tzedaka giving.
Good
sailing and good luck or, as we say, have mazal,
which is another important piece of the financial puzzle.
Eli W. Schlossberg was CEO of a successful business
for 15 years and is now head of the Castle Consulting Group and EWS Realty
Corporation. He is a trustee of the Ahavas Yisrael Charity Fund.
