Alpha Pointe Capital

Should you view your Portfolio the same way you would if it were your Company?

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On Pointe – Wealth Management Edition


Look. At the time of this writing, we are NOT in a recession. Yet, the stock market and bond markets are signaling one. Most business operators are seeing the pinch. But, typical of markets, they react well in advance of actual economic data. Remember this as you read through this week’s Edition of On Pointe Wealth Management….

Most mornings I like to run for my exercise. While I do love music, I’m also a huge fan of Podcasts. One always stirs my entrepreneurial mind. “My First Million”. This podcast features hosts Shaan Puri and Sam Parr who talk about business ideas. Their takes on the world are not always conventional. They don’t always agree with each other or their guests. I find this provides healthy debates to analyze several facets of an issue.

So, as I labor through my beautiful morning run (more of a jog/hobble) I caught their latest episode. The new episode of “My First Million” features guest Andrew Wilkinson. The hosts ask what he’s doing with his portfolio of companies in the face of a potential recession. Andrew is an entrepreneur and owner of more than 40 large companies. While some entrepreneurs may spend their time working on that “one great idea. Andrew spends his time researching and buying companies.

The topic is perfect for the current bear market environment we’re in (I’m writing this in October of 2022). The show notes describe their discussion as “winterizing your business and finances.” So, I began thinking about how some of these themes may apply to portfolio management.

I manage portfolios for clients during bear market cycles. Also, I must manage my business. Should business operators view their retirement portfolios like they do their companies? Should they apply the same decision-making? Or are they the same?

Whether you’re analyzing your company or your portfolio, you care about one thing. Survival. Especially in difficult markets and economic cycles.

Quick note. Notice that I keep separating markets and the economy. This is intentional so please read on…

Sometimes the tools for analyzing are different for businesses and retirement portfolios. But whatever indicators or data either is using is still trying to assess the same things. Such as how long, how deep, what areas are holding up, what areas are weak…

Liquidity. How much flexibility does the business have and where do I get cash/credit when revenues fall? Here’s where the CFO becomes an even more valued position than ever before. Maneuvering a business’s finances is important. Positioning a company’s finances may lead to the toughest of business decisions.

Same with portfolio management. While I may only have 3 investment decisions, buy, hold, or sell… these often have huge implications for the integrity of the portfolio. All 3 of these decisions affect liquidity.

If a portfolio needs liquidity one of my decisions might be to sell off part of the portfolio. The consequences are the portfolio may lose its ability to recover when markets rebound.

For business? Layoffs and reassigning positions may affect sales. Which may delay recovery, even when brighter days for the economy return.

Should a business pivot during these tough periods? Or reposition their company’s human or other assets?

Again, from a “survival standpoint major change may be necessary. Some companies do and may have to make these types of decisions. But what may work in one economic cycle may not translate to success in another. Also, are these temporary or longer-term trends?

The consequences of these decisions are great. They may very well affect the business’s survival… for better and even worse.

This dynamic is the same for managing a portfolio. Fleeing to an all-bond or cash portfolio during market strain may seem like a great idea at the time. Yet, if the market correction is short-lived the portfolio won’t be in a position for recovery, not at all.

Some might look for “recession-proof” industries or sectors to invest in. When time is a factor, and the future is unpredictable, these areas may not be worth as much when the markets shift.

There is also one huge difference between retirement portfolios and managing a business…markets move well in advance of economic conditions.

Also, markets appear to move fast. Faster than actual economic conditions.

This is likely due to lagging government statistics.

Another huge difference is the speed at which portfolio changes take effect. If your portfolio consists of equities, bonds, ETFs, or mutual funds there will be a 1 to 2 business-day settlement. Add margin or a credit line may take 1 to 7 business days. A much different timeline than a business.

These days it is very hard for most people to track the markets because they move so fast. People talk about making big changes in their portfolios to prepare for a recession. By the time they make these changes, the market has already corrected. So, shifting the portfolio may cause it to be out of sync.

Or maybe a “whipsaw”. A “whipsaw” is when the newly added investment in the portfolio moves in the opposite direction. This dynamic has consequences for the future integrity of the portfolio

A business can’t pivot, reallocate resources, or find liquidity like a retirement portfolio. Actions like layoffs, selling assets such as real estate, or re-channel sales all take time. Plus, the larger the company the less nimble it may be to pursue different tacks.

While there are similarities, the biggest difference is time. Especially the time it takes to adjust. A portfolio’s reaction time is much quicker than businesses. For this reason, I don’t often make large, wholesale changes to a portfolio.

We adjust as needed. Yes, we do often sell certain investments. Most of our reasons are to preserve liquidity and to reduce volatility. Most importantly, our changes are for the market rebound as we attempt to move ahead of the markets.

If you’re operating a business, you may want to think twice about managing your portfolio the same way.


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Registered Representative of Thurston Springer Financial and Investment Advisor Representative of Thurston Springer Advisors. Securities are offered through Thurston Springer Financial, Member FINRA, and ‘SIPC. Advisory services are offered through Thurston Springer Advisors, an SEC Registered Investment Advisor. Alpha Pointe Capital is a DBA of Thurston Springer Financial and Thurston Springer Advisors.