Downturn Defense
Who protects Your Hard-earned Retirement When the market crashes?
Don't Be a Statistic
I remember when close friends and family members of mine lost nearly half of their retirement savings during the 2008 financial crisis. Even worse, some withdrew their money at the low, making their ability to bounce back even more difficult.
Dont be a statistic. Let our team take steps to reduce your losses during the downturns.
avoiding losses vS Bouncing Back
Did you know that it could be twice as hard (or more) to bounce back versus simply not losing investment capital in the first place? Here’s an example:
Let’s assume you have $1,000,000 in your retirement account and the stock market crashes, reducing your fund by $500,000. That would be a 50% loss.
To recover, or to return from $500,000 back up to $1,000,000, you would literally have to DOUBLE your money — or achieve a 100% return. This negative impact increases the larger the percentage of your initial loss. For example, if you had lost even more — let’s say $600,000, or a 60% loss — you would have to TRIPLE your money to recover, or achieve a 150% return. That’s why it can sometimes take many years to recover from a serious downturn.
If you can reduce your losses — even by a modest amount — it can often make a huge difference when you’re trying to bounce back after the market recovers.
How do We Defend against downturns?
Good question! We defend by using a small portion of your investment to hedge against potential downturns.
Unlike many investment advisors, our team does not simply stick your money in investments and then let it sit there. We are actively monitoring the market, the health of your investments, the economy, politics, other alternative investments, and so on. When market risks look like they might be heating up, or if we can see catalysts that might turn into a loss, our team proactively uses derivatives to reduce the corresponding losses related to those risks.
It’s not a perfect science, and losses do still occur, but our proactive hedging tends to be surpisingly successful over time.
Does this service cost more?
Yes, the hedges used to defend your account do cost a small amount to set up, but they can be well worth it in the end. It works very much like having a type of investment “insurance.” You insure your car, your home, your life — why wouldn’t you also insure your hard-earned retirement fund to ensure you have it when you actually need it during those later critical years? Yes, there will be times when the protection cost more, but the value becomes crystal clear when a major downturn comes and the extreme losses are minimized, if not turned into a profit!
Here is an Example:
An over-simplified example:
Let’s say we invested in 1000 shares of Biz stock for $100 per share, for a total of $100,000.
Depending on market conditions, we might also buy an extra $4,000 in in derivatives or hedges to protect that investment, which ensures that we will still be able to sell the shares at that same $100 price even if the market crashes. This reduces our risk dramatically.
Now let’s say the market crashes. The price for Biz stock drops down to only $50 per share. If we hadn’t purchased protection, we would have lost $50,000. But we did, so we are only down the $4,000 we spent on the hedges. We can therefore still sell the stock at $100 per share.
At this point we can look at the underlying company and decide if it is still a sound investment, or if we think it will recover. If we think it will, we can literally buy twice as much Biz stock now at the new $50 price (always striving to “buy low, sell high”). We could also buy more hedges, of course. If the stock later recovers to the $100 price per share, we will have made a 90%+ profit, while those who didn’t buy hedges will barely be making it back to breakeven.
Notice how the hedges turned the market crash from a negative into a positive? Our goal is to make you smile no matter what direction the market turns.
Want even more information? Here is a video by Kevin Hurley, managing partner at Hurley Investments, that gives actual examples and explains how the process has worked in real time.
Do We guarantee against all loss?
No. Any retirement fund or similar account will experience losses from time to time. That is the nature of investing in the stock market. Plan on it happening now so your fears don’t convince you in the moment to pull your funds out at the low point (the worst possible reaction). It is simply part of the investment journey. Our goal is to maximize your wins in the longterm so that they dwarf any losses along the way.
