Broker Check

Investors' Inability to Adapt

| April 18, 2023

     I constantly remind clients that we must invest for and navigate the markets we’re given, not the markets we wish we had. I believe a very common mistake investors make is their failure to adapt their portfolio strategies to the ever-changing economic conditions. I think it has become very impalpable for investors to notice pragmatic economic changes beyond news headlines. Primarily, because we’re used to and even expectant of never-ending growth in equities. ¹

     Passive investment strategies have been encouraged over the last few decades. Alarmingly, it seems investors adopted the “buy and hold” philosophy as if it meant “buy and ignore”. Historically over the last two decades, data shows passive strategies outperformed over the long term. Mostly during an era of technological revolution and innovation and consider the 3 decades of decreasing interest rates. Investors have been on an uptrend, they’ve accumulated and grown their assets, and to the naked eye, it seemed there was no need for portfolio reallocation or changes in positions. ²

And then 2022 happened.

     For 30 years investors thought of a 2%-3% average inflation rate and the Fed’s loose monetary policy as the norm. ³ But, that reality that is changing, and I still hear hesitation from investors who challenge my argument that economic decline is on the horizon and the Fed won’t be able to prevent it. But I would make a case that you need to adapt your investment philosophy.

     The “cash is king” philosophy, typical of recessionary times, may prove to be dangerous as inflation persists. While liquidity provides financial flexibility, stubborn inflation produces a loss of purchasing power, and could hinder your long-term investment goals. This is especially true when investors fail to adapt and consider potential returns in assets besides equities and even bonds. ⁴

     My goal with this commentary is that investors become more cognizant of economic policy and financial conditions, to explain that investors’ failure to adapt is dangerous and contagious. Recognizing times are slowly but steadily changing might suggest exploring new portfolio options and strategies.


¹ James Royal. “Stock market outlook for 2023: Here’s what experts predict amid recession fears.” Dec. 2022. 2023 Stock Market Outlook: Here’s What Experts Think Could Happen | Bankrate

² Jon Maier. “Why Passive Isn’t Really Passive.” Jan. 2023. Why Passive Isn’t Really Passive – Global X ETFs

³ St. Louis Fed. 30-Year Breakeven Inflation Rate. 30-year Breakeven Inflation Rate (T30YIEM) | FRED | St. Louis Fed (

⁴ Powering a Personal Wealth Movement. “Is It True That Cash Is King During A Recession?” Aug. 2022. Is It True That Cash Is King During A Recession? (