Nobody likes losing money. In investing, losses come with the job even when you follow the same process that made you money the last time. The trick is not avoiding every drawdown. It is not panicking when one inevitably shows up.
I sat down with some new partners recently and pulled up a real client account. Aggressive strategy. Rough 2022. The tech sector took a beating and dragged some of our positions down with it. A good case study – nothing teaches quite like a wound that is already healed.
Here is what usually happens during a drawdown. Clients start asking questions. Fair enough. They only ask about the losers. Nobody ever calls to ask why the winners are winning. Funny how that works.
One client zeroed in on a Treasury ETF with a covered call overlay. He told me we bought it at the “peak.” Actually, we did not. Even if we had, we do not buy anything based on a single chart, a single indicator, or a hunch. If investing were that simple, I would have saved myself 30 years and just used a dartboard.
I also do not spend much time on post-mortems. “We should have bought this.” “We should have sold that.” Great dinner party conversation. Makes everyone sound like a genius for about ten minutes, right up until the bill arrives. I would rather spend that time looking for the next opportunity.
For the record, that ETF, which quietly delivered an average yield of more than 1% a month was never meant to be the hero of the portfolio. It was insurance. Insurance is not supposed to be exciting. It exists so that when markets get ugly, you can walk away with less damage than you otherwise would have suffered.