Time to Focus

Presented by the Hardee Investment Group and RBC Wealth Management –

The stream of bad news seems endless. The debt downgrade of the U.S., unemployment and home foreclosures, the election and now the fiscal cliff. Maybe we buy into it by listening to media outlets and think what they’re telling us is the sole truth. Maybe we only listen because it sells. Nevertheless, we’re constantly fed bad news and because of that we’re fearful when it comes to investing. The current economic state can related to a disease or illness. We have symptoms of the disease, the disease itself and a reaction to the news we’ve just been given. No one has ever had a heart attack and run a marathon days later. It takes time to recover, train and prepare for the event. Just a few short years ago, our economy had a proverbial “heart attack”. Even though we’re still trying to recover, some think we should be at the starting line tomorrow for the gun to go off.
Currently, we are in an environment that is beneficial for all politicians. By prolonging this fiscal cliff issue, it creates more anxiety and hysteria which will ultimately result in constituents saying “just get it done.” Two years from now on the campaign trail, they can say they solved the problem. However, we can’t run our businesses or lives on crisis management or grandstanding.

America faces a long term problem that requires a long-term recovery program. In the mean time, as investors we deal with daily issues and take a shorter-term approach. The typical reaction to this “disease” is to liquidate the portfolio and go to cash. In essence, this is what I consider the bunker mentality. What people don’t realize is they’re cannibalizing their own accounts. Liquidating the portfolio is not in their best interest. Let’s look at a few examples I’ve seen. Client J had a $10 million bond portfolio ten years ago, netting the client about $700,000 in annual income. Because of where interest rates are today, this client is now only earning $350,000 on that bond portfolio. Their standard of living has been cut in half. While this isn’t a direct result of their actions, it helps us realize the market we’re living in. Another example is that of Client L. They panicked when the market declined in 2008 and cashed out. They’ve been sitting in cash ever since, effectively earning nothing on their money. Yet they still need to live and receive monthly distributions. With interest rates near zero, this client has been consuming 4-5% of principal annually. To this day, they have not invested and are cannibalizing the account because they aren’t earning anything on their money. The result is 15-20% decrease in their principal by being “safe.”

There is always some reason not to invest and there is always an “I told you so” story. Playing it safe in money markets and C.D.s is creating its own horror story as time goes on. Develop your investment goals and stick to them. This will help you through the unknown and uncertain times. Having no plan is equivalent to have little chance of success.
In times of fear, the feeling of security is so important. The Hardee Investment Group can help you secure your financial future and realize financial goals. We encourage you to visit us anytime online at www.HardeeInvestmentGroup.com or call us today at 713-853-0879.


This article is provided by H. H. Will Hardee, AWM, a Financial Advisor at RBC Wealth Management’s Houston Center office, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice. RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC.