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On the Upside

Surviving the Economic Storm // Chad Hemphill

One of the more important lessons of my career in regards to advising the families with investable assets occurred in the first quarter of 2011. As the market began righting itself, I was reminded of the emotional journey we had weathered with our clients over the past couple of years.

The morning of September 15th, 2008, the S&P 500 was around 1250 as headlines announced, “Lehman Goes Under, Financial System Braces for Storm.” Subsequent events – bank bailouts, TARP, Bernie Madoff, AIG, and home foreclosures – contributed to the massive sell-off of equities, as investors worldwide had to make the difficult decision to sell or hold on for the long haul. During that time, essentially the whole world was driven by fear to sell, and at almost any price. This time period was not easy professionally, but it was one of the times when our clients needed us the most.

Did those of us advisors/investors who did not sell out of our portfolio during this two-year debacle know something different about the markets or the economy? No. What we did know is that during times of great fear and panic in the market is when some of the best long-term opportunities are created. We simply did the hardest thing one could, buying when it seemed like the rest of the world was selling. The wise investor knows that selling at tops and buying at bottoms is impossible to do with any amount of consistency, so we simply did not consider selling out of one’s portfolio an option during this time.

If there is one common theme of all the conversations that I had with individuals that had the gumption to remain buyers of equities during this time of history, it is their faith in the future outweighed their fear of it. They certainly needed support along the way, and did have doubts. As an advisor, there were tough days and conversations that we had with the families we work with. The financial media (which is famous for always giving the wrong advice at the wrong time) was not helping our cause, nor was any other outside influence.

Through leadership, understanding of each family’s particular situation and goals, and our faith in the future, we advised our clients to hang on despite their fears. We turned our conversations from what the headlines were proclaiming to a much higher-level view, putting into perspective the long-term goals each client held. While it was emotionally difficult to remain steadfast and not sell, we were able to guide them through the storm. The key variable was that they did not react to their fear of the future, and on December 21, 2010, the S&P 500 again reached 1250.

The difference in the portfolios that we are seeing now is profound from where they were two short years ago. This has been a huge learning experience for both our clientele and our Panoptic team, as we discuss during our reviews how we were feeling and where the accounts were in comparison to where we are now. Although it was difficult for many of our clients at the time, staying true to Panoptic’s principles paid off.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is not guarantee of future results. All indicies are unmanaged and cannot be invested into directly.

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