Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis


Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Running out of somedays

By Jerry Wagner

When I was still a teenager, I began a bad habit. While thinking about the future, I would always reference “someday.”

The big decisions: Someday I’ll get a job. Someday I’ll get married. Someday I’ll buy a home. Someday I’ll have children. Someday I’ll retire. Someday I’ll have grandchildren.

The smaller ones: Someday I’ll get a new car. Someday I’ll lose weight. Someday I’ll go to Europe.

I say it was a bad habit because I tended to procrastinate. The dreams of someday let me put off until tomorrow many goals that I may have been able to attain earlier in life.

Regardless, as the years went by, I managed to reach my somedays most of the time. Some were easily grasped. Others took a very long time, and often the aid of others, to achieve.

And while you may have a few somedays remaining on life’s shelf as you get older (and even add a couple of new ones), you realize that the number of somedays diminishes as time goes on and that some of the remaining ones are unobtainable. You’re running out of somedays.

When it comes to investing, waiting for someday could cost you

Back in 1981, when I started Flexible Plan Investments, Ltd., even if you knew when any particular someday (for example, the end of a stock or bond rally, the beginning of a long bear market) was going to come, there was not much the average investor could do about it. The only strategy anyone was talking about was buy-and-hold investing.

With buy-and-hold investing, you have to hope that you have the willpower to ride out any decline—even in the face of a loss of 50% to 75% of the value of your investments. Those whose willpower falls short are usually doomed to sell at the bottom and then wait out years of a subsequent rally before getting up the courage to invest once again.

With the spread of passive asset-allocation portfolios, many investors thought they had discovered the answer to this dilemma. If they simply diversified their investments into several asset classes, they could reduce the losses and avoid the temptation to sell at the worst possible time.

But in recent stock market meltdowns, they learned firsthand that mere diversification did not do as much as they had hoped in reducing their losses. It seemed like everything fell when stocks declined, except cash, gold, and bonds. Making matters worse, diversification limited returns during the good times in the stock market.

Prepare for someday today

Of course, we use a different method to limit losses—dynamic risk management. By being responsive to the market actions, rather than passive, we have been able to make money or mitigate losses in recent downturns. (For more on how Flexible Plan performed during 2020’s full market cycle, see “Why 2020 is a rare chance to judge your active manager’s performance.”)

I know I am preaching to the choir when I write this message to our clients. But for those that only use us for a small portion of their investments or those reading this article in its wider distribution, I have to ask, “Are you concerned that someday you may lose the recent gains you have achieved, whether they be in stocks or bonds?”

I’ve noticed that most people only have a passive core portfolio. A few more have a passive core with a small amount of actively managed “explore,” or alternative, investments. Many of these investors have gains from the passive core portion of these portfolios that will be at risk someday when the next crash in either stocks or bonds or both occurs.

It’s still true that no one knows when that someday will occur. But you don’t have to use the same investment methodology that failed in other downturns to prepare for when the next someday occurs.

At Flexible Plan, we now have turnkey, dynamic, multi-strategy core portfolios that can replace or share the core responsibilities of the old-school passive core that you may be employing. They are designed to meet your suitability needs from conservative to aggressive. And because they are Quantified Fee Credit (QFC) strategies, there is little or no FPI advisory fee to be billed (after the application of fee credits) beyond your financial adviser’s regular fee.

Most importantly, our QFC Multi-Strategy Core and QFC Fusion 2.0 turnkey strategies can deploy a wide array of defensive methodologies to handle the “grizzly bear” markets that will be here someday. While each is diversified, they don’t depend only on diversification to protect your investments. They are designed to move to cash, bonds, hedging, and gold at the right time to help preserve your investments.

If you have been planning to take protective action against coming bear markets in stocks and bonds someday but don’t want to abandon markets that are providing gains today (whether too soon or too late), don’t procrastinate. Activate your core and add one of our turnkey, QFC multi-strategy options to your portfolio. Investing at least half of your portfolio in one of these strategies today could make for big savings someday.

Don’t run out of somedays by waiting to take action to protect your investments.

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