Investment Management: Navigating Inflation, Market History & Risk
By Paul Lechner, Esq., CPA — Lechner Law Office, P.C.
Most of us naturally focus on money. But many fail to recognize it’s difficult to be genuinely passionate about money. To be truly successful, you need a purpose — a sense that your contribution matters. Without this focus you’ll wander forever, like Alice in Wonderland asking the Cheshire Cat which way to go, only to be told: “That depends a good deal on where you want to get to.”
Principles
Why do brokers on the floor of the New York Stock Exchange always cheer at the closing bell — no matter what the market did that day? Because whenever you trade, they make money whether you did or not. Purchasing stock is like becoming a part owner in a business — not like taking your money to the casino floor. You need to understand the dynamics of the business you are investing in; otherwise you are simply speculating.
Inflation and Taxes
Inflation has returned. With the consumer price index rising sharply, the Federal Reserve began raising rates. Inflation allows the government to pay off debts with cheapened dollars. Despite the pandemic, federal tax receipts boomed — revenues jumped 18% in one fiscal year, the biggest increase since 1977. If you depend on your portfolio for income, you must seek to minimize your exposure to the impact of inflation and taxes.
Market History
Ultimately, demographics drive growth. Without knowledge of the future, many simply project current market conditions forward — not recognizing there will be corrections. High returns are not a divine right. The only thing you can be confident of when forecasting returns is that you will probably be wrong.
Margin of Safety
Do your homework. Purchase companies run by people who think like owners. A “margin of safety” is the difference that will absorb unsatisfactory developments. Always maintain some protection. Risk is not so much in your portfolio — it’s in yourself.
Successful investing is about managing risk, not avoiding it. Study Benjamin Graham and Warren Buffett. Do your homework.
Being proactive is the best way. Some say the future cannot be predicted — others say the only way to predict the future is to create it. Our tax and financial planning services integrate investment strategy with tax efficiency to help you protect and grow your wealth.