Message From the CEO
We all want to follow the old adage of buying low and selling high. It appears to be a simple and straightforward way to achieve financial success in the stock market. From an overarching standpoint, you can generally accomplish this through a buy and hold strategy because, with all the volatility in the market, it trends upward.
But what happens when recessions last 18 months or more, and you lose 40% of your portfolio’s value?
Though buying low and selling high is simple advice, the strategy is complex because of fear and greed. We don’t want to sell when the market trends ever upward because we may miss out on additional gains. We don’t want to sell when the markets collapse, as they have in 2022, because it will lock in losses.
These realities complicate the buy low sell high strategy for the following reasons:
- Market prices often reflect emotional responses to events rather than strictly raw numbers and company performance.
- Herd instinct can cause you to buy high and sell low. When others are buying, you want to buy, and vice versa. However, herd instinct often has individual investors jumping in at the peak and selling at the bottom.
- Outside influences make short-term market performance difficult to predict.
- Markets tend to overshoot at both ends.
- You cannot tell at the moment where you are in the cycle. A peak only forms when a market decline begins, and valleys only develop after the market recovery commences.
To build wealth, it is often necessary to focus on each investment opportunity instead of trying to time the market. To implement this approach, you start with a review of your long-term financial needs and participate in investments that support those goals. It may mean selling stock market investments at less-than-optimal times, but it is better for your long-term outlook because the new investment aligns more closely with your objectives.
Commercial real estate syndications are real cash-flowing assets delivering less volatility and risk than the overall market. It can consistently produce double-digit returns with lower downside risk because you own a physical asset.
P.S. 2022 is the last year the IRS allows 100% bonus depreciation, which could reduce taxable income. In 2023, the maximum bonus permitted depreciation is 80%. Then it drops to 60% in 2024.
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