How to invest, 3 mistakes to avoid in a bear market: Carson Group

  • Stocks plummet as inflation rises, but a few leaders at Carson Group aren’t panicking.
  • Bitcoin may one day be “obsolete” due to a feature that most consider to be its greatest strength.
  • Investors should keep a cool head and avoid three common mistakes during the bear market.

With a recent stock market collapse, investors are looking for advice on how to protect their hard-earned savings.

Times like these are why wealth advisor Ron Carson founded the eponymous wealth solutions company, Carson Group, in 1983. The company manages approximately $20 billion in client assets and also provides a coaching service for financial advisors looking to navigate the market


volatility

A pair of high-ranking company leaders — Jamie Hopkins, managing partner of wealth solutions, and Nick Engelbart, chief financial officer — recently spoke to Insider about the impact of inflation on investors, why bitcoin’s transformative potential has been overhyped, and the three biggest mistakes being made. investors can make now.

A smarter way to think about inflation investing

A major reason why stocks are deteriorating in 2022 is the ever-worrying issue of: 41 years of high inflation

Price increases, which were only exacerbated by Russian invasion of Ukraine at the end of February, weighed in on consumer spending and economic growth while forcing the


Federal Reserve

until aggressively raise interest ratesthat some economists fear will happen push the US into a recession

But amid all the buzz about decades of high inflation, it’s easy to forget a few key facts about higher prices, Hopkins told Insider. First, price growth is largely driven by: supply chain problems that will eventually be resolved; second, inflation varies wildly between cities, counties and states; and third, higher prices are disproportionately harmful to retirees and others who are out of work.

Those last two points are especially important for financial advisors and retail investors to keep in mind as they struggle with price increases. People most affected by inflation — whether they live in a city where prices are rising or are retired and have seen their pricing power decline — may want to consider prioritizing income investment and take fewer risks in the stock market.

Ideally, investors can limit the effect of inflation on their wallets by continuing to work, Engelbart said, although those who don’t have a workforce can survive by investing in stocks that pay dividends or protect their profit margins by pricing prices. increase without destroying demand.

“The best protection you can have is your real earning power — your ability to earn extra pay and earn more over time based on your talents and abilities,” Engelbart said. “And make sure you invest in securities with price power

Bitcoin Won’t Be Revolutionary, But Not For The Reason You Think

When Carson Group advisors work with their clients, their role is to educate and provide investment recommendations, Hopkins said, adding that no asset class is ever off the table.

However, Hopkins said it would be difficult for him to recommend an allocation of more than 1% to 2% in cryptocurrencies, even though he said he is a “great believer” in digital assets and blockchain technology.

The director currently has two major objections to the nascent asset class: crypto funds often have high costs, and he does not believe that cryptos bitcoin will be an effective inflation hedge in the long run.

“I have yet to believe that crypto has a long enough track record to show whether it can be a hedge against inflation,” Hopkins said. “It never existed during a period of high inflation, so I think it’s very hard to say how it would perform.”

Bitcoin’s performance over the past six months suggests Hopkins is right, though the mind behind a top-performing inflation fund recently told Insider that bitcoin is an important part of its portfolio, noting that the price of the cryptocurrency is four times higher than it was before the pandemic.

But in addition to his doubts that bitcoin can be a hedge at higher prices, Hopkins has another more off-the-beaten-path reason why he doesn’t believe the original crypto can ever replace the dollar: its limited supply. While many analysts argue that bitcoin’s limited supply is a major force making digital assets equal to goldHopkins instead sees the position as an obligation.

“Ultimately, this means it will be obsolete,” Hopkins said, referring to bitcoin’s steady supply. “Because every time someone dies and loses their key and that gets stuck, at some point you’re going to have too many people who are no longer able to transact.”

Hopkins continued, “That’s not a short period of time. But if you’re just talking about a technology and you think, ‘Well, this is it — this is the new currency of the future,'” that’s actually a huge problem. is the same as if we printed a finite number of dollar bills today. We would end up printing more because they wear out, get destroyed and get lost.”

While Hopkins believes the inevitable decline in bitcoin’s supply if people lose their keys will stop the digital currency from rocking the world of global payments, that doesn’t mean he’s a bitcoin bear. In fact, Hopkins said he has 2% of his personal portfolio in cryptos, including bitcoin — though he believes the “best encryption and iteration” of crypto is yet to come.

“Adopting a single coin — even though the bitcoin people hate it when I say this — is like, tell me a single piece of technology where the first iteration of it became the ultimate use of that technology,” Hopkins said. “It would be like saying, ‘Well, the Wright brothers made the plane, and that’s as good as the plane will ever get.'”

3 Big Investment Mistakes to Avoid

While it’s easy to remember the tried and true rules of successful investing, it’s much harder to follow, especially during periods of high market volatility.

To keep new and experienced investors on track, Hopkins shared three of the most common investing missteps he sees, while Engelbart added some wise words.

The easiest way to get into trouble when investing is by: trying to time the marketsaid Hopkins. No one has ever developed a tried-and-true market-timing strategy, the director said, and the problem with selling stocks in hopes of buying them back at a lower price later is usually by the time investors are comfortable investing again. , the shares have already recovered .

“People tend to do the wrong things at the wrong time,” Engelbart said, adding that missing even a handful of the biggest up days for stocks can be devastating to an investor’s returns.

Hopkins also said that while there may be a place for strategic large-scale selling — for example, if an investor is nearing retirement and willing to sacrifice profits for the safety of cash — he said there is almost never a justification for violation† This strategy, which includes day trading, is essentially market timing on steroids, and Hopkins said it tends to end badly.

According to Engelbart, investors should refrain from market timing and overtrading because history shows that “the market will do anything to prove most people wrong at any time.”

The last investment mistake Hopkins warned about is: don’t understand asset allocation† It’s common knowledge that diversification is one of the keys to a portfolio’s long-term success, but Hopkins said investors can make the mistake of thinking that all they need to do to diversify is own many different ones. stocks, exchange-traded funds (ETFs), or mutual funds.

But simply owning a wide variety of stocks or funds with exposure to the same sectors or industries tends to create a “super inefficient portfolio,” Hopkins said. He advises investors to know what they own and to research carefully what is in a fund before deciding to invest in it.

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