There and Back Again

Friday Reflection | June 4, 2021

Owning stocks has historically been financially rewarding, assuming you can tolerate the short-term swings in price, and stick around to benefit from the longer-term growth of the underlying businesses. We use stock funds as a foundation for our client portfolios specifically so they can benefit from that long-term exposure to growth, and ensure their savings maintain purchasing power over time.

Saving for and building an investment portfolio for the future is a dynamic process. Along the way, spending needs and unexpected circumstances require decisions to sell and re-allocate stocks and funds. When and why you sell relates to the performance of the market. Importantly, it also relies on flexibility in navigating the boundary between your portfolio and your life needs. With your life choices and priorities front and center, handling change and volatility can lead to more clarity and helps sustain a sense of stability even amid continued uncertainty.

The Market Landscape

Stock market prices act as a dynamic measure of perceived value. Buy and sell transactions are subject to the same laws of supply and demand as more prosaic commodities as lumber and computer chips. When there are more buyers than sellers, prices rise. When supply meets demand, as it finally has for N95 masks, prices drop.1

There are also emotional forces at work, which we see when panic or euphoria runs through the market’s collective psyche. Last spring, the unknowability of a deadly virus panicked institutional and individual investors alike, and many investors chose to sell. Prices for stocks plummeted. With an indication that social restrictions could slow or stop the spread of the virus, many investors became optimists once again, pushing prices back up to pre-pandemic levels within months.

Today, the market is fixated on the path of economic re-opening, debating how quickly companies can restore earlier levels of operations and profits. Is it going too fast, too slow, or just right? A successful spring vaccination campaign, supported by strong federal aid has led to a rapid expansion in consumer demand. In contrast, companies are struggling to hire enough workers to resume or expand operations,2 and global trade is continuing to experience slowdowns.3

This volatile and unknowable landscape usually fails to provide obvious guidance for our personal investment decisions. At any particular moment, we may have the certainty of immediate information, but no certainty of a future path.

Crossing the Boundary

In the landscapes of our lives, we face reopening decisions as well, decisions that depend on both emotional factors and also practical, financial ones. Shaping a vision of that future requires us to imagine the risks we may encounter, and to anticipate what we prefer, and what we can handle.  

Risk tolerance is an emotional bellwether, and it acquired a new dimension during the pandemic. Since the spring of 2020, an unwelcome kaleidoscope of limitations forced our capacity for patience as well as action. In finance, that takes the form of a tolerance for volatility, including the risk of loss. It also means being able to comfortably reach across the boundary between the daily life of money – earning, spending, borrowing, saving – and the longer arc of investments.  

To make sense of your landscape and the opportunities you are considering, consciously assessing risk tolerance is a good starting point.  To that you can consider your needs in terms of all your resources – career, housing, perhaps investment real estate, your network of family, friend, and community relationships, and – yes – the extent of your liquid investments in cash, bonds, and stocks. Depending on where you want more and where you need less, you can choose to trim any of your resources to ‘re-invest’ in something else – in relationships, in a retirement transition, in a gift to family or charity.

Rebalancing Life

Rebalancing is a core concept of portfolio management, periodically trimming successful investments in order to invest in more appealing opportunities. As the economy reopens, we can ‘rebalance’ life choices to include much more – social gatherings, volunteer work, returning to our work locations, accompanying our children to move into on-campus college accommodations, visiting elderly family. 

Those new choices often necessitate financial decisions, including repositioning an investment portfolio. Each arena of activity affects the other; the boundary between finance and life decisions is fluid. With some practice, we can cultivate the landscape on both sides; we can stay invested while retaining flexibility and navigate challenges more easily.

1 Honeywell, a leading US supplier of N95 masks, recently shut down on of its manufacturing lines due to lack of demand.

2 Tepid job growth driven by too few workers seeking work.


Kate King, CFP - Partner and Chief Investment Officer 

About Kate Campbell King, CFP®

Kate Campbell King is the Founding Partner and Chief Investment Officer at North Berkeley Wealth Management. Kate provides clients with a unique approach to their financial decision-making.

Read more about Kate

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This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

By |2021-06-11T15:25:22-07:00June 4th, 2021|