🐄Risk Management: Stockyard to Stocks

As a financial advisor, I wear two hats: one in the world of wealth management and the other on my hobby farm where I raise cows. Recently, I had a heartwarming experience in the barnyard that got me thinking about risk management—both in farming and investing.

The New Arrival

Friday morning, I stepped out to check on my cows and discovered a delightful surprise: a newborn calf. The momma cow was gently tending to her little one, mooing softly and ensuring it was clean and safe. Witnessing these maternal instincts in action reminded me of the importance of protection and care.  I put a video of this on YouTube if you’d like to check it out:  How momma cow cares for her newborn calf video

Snow Risks and Timing

Reflecting on last year’s calf births in March, I remembered finding them lying in the snow. Acting swiftly to move them onto dry bedding was crucial. Leaving a calf exposed to the cold risked its well-being. Waiting nine months for a calf’s birth only to lose it due to exposure was a risk I decided to mitigate.

So, I adjusted my breeding schedule. Now, our calves arrive in May, well out of the snow-risk zone. While there’s still a chance of losing a calf, it won’t be due to snow.

Investment Risks and Timing

Investing in the stock market also involves risks, and timing matters.  Unfortunately, timing the market isn’t something that most people are successful at doing. Consider the Dot-Com Bubble of 2000 coupled with the Global Financial Crisis that started in 2007:

• The market took seven years to fully recover after the Dot-Com burst – a 49% drop.
• Unfortunately, this recovery was followed by the crash of 2008, which took about six years to cover – a 57% drop.
• In total, it took around 13 years for the market to return to pre-bubble levels.[i]

Source: [1] How the S&P 500 Performed During Major Market Crashes (visualcapitalist.com)

Can you imagine if you were retiring in 2000?  Talk about bad timing!

Applying Risk Management

So, if timing the market is just a gamble, what is one to do?  Just as I hedge against calf risks on my farm, I advocate for risk management in wealth building. Blindly entering the market without proper risk mitigation can be challenging to recover from. Here’s how I help my clients:

• Hedging Strategies: Whether you are invested in the broad market or have concentrated positions, we can use strategies that seek to protect your investments from “Dot-Com bubble-bursting” scenarios.
• Long-Term Growth: The market remains a great vehicle for potential long-term growth, but prudent risk management is essential.

Interested in learning more about managing risk in your investment portfolio? Schedule a free consultation with me at luckinbillfinancial.com. Let’s navigate your financial journey together! 

Thanks,

Ken Luckinbill