October 2022

The Lesson of the Tortoise and the Hare

This might be a good time for investors to recall the fable of the tortoise and the hare. In the story, the speedy hare and the plodding tortoise agree to a race. The hare goes out to a big lead, so he decides to take a nap. While he naps, the tortoise continues his steady trip to the finish line and beats the hare.

In times like these, people who take a slow and steady approach might also win the investment race – or at least have a better chance of staying even.

As we know, the markets have been very disappointing over the last several months. They have faced a variety of headwinds, including inflation and uncertainty about whether that inflation will be followed by recession; war in Europe; supply-chain problems; labor shortages; and continuing concerns about the effects of COVID. In addition, the midterm elections are shaping up to be extremely divisive, with the two main parties espousing vastly different agendas that could, in turn, have vastly different results for the economy.

It could be that in the fairly near future the economy becomes more stable and ultimately blasts its way to the growth and returns many people expected to see when the worst effects of the pandemic eased. Or it could be that this situation continues indefinitely or even worsens, both in the U.S. and abroad. It is always difficult to predict the market's future, of course. But now it seems particularly hard and fraught with peril.

One option in periods of uncertain markets can be to take refuge in very conservative investments. However, given the current relationship between interest rates and the inflation rate, that approach could leave you treading water or even losing money.

The opposite approach can be to invest in stocks that you believe will thrive in this economic environment. The problem with that is that it can be hard to predict what those stocks might be. Some startup stocks, especially in the tech and housing sectors, have fallen precipitously. And some well-known names – including Meta (Facebook), Apple, Microsoft, Tesla and Amazon – led the list of largest single-day market cap losses in 2022.

So what's an investor to do? At Peachtree Investment Partners, we start by talking with you about your risk tolerance, your investment timeline, and your overall financial picture. If your risk tolerance is low or your timeline is shorter, we can help you invest in fixed-income and other conservative investments that look to preserve capital.

In general, though, we focus on the stocks of large, established American companies that are well-positioned in their industries and have strong and experienced leadership. We look for consistently good return on investment and a long history of revenue and earnings growth. We choose companies that have weathered many cycles of economic, political and social change and that have avoided most of the market's extreme highs and lows.

We also believe strongly in stocks that pay dividends. Dividends provide a shield against market volatility because all your return does not come from an increase in the stock price. Choosing to reinvest your dividends also can help to grow your portfolio significantly over time.

Of course, there are no guarantees in investing. But our experience has shown us that this personalized approach can help maximize long-term returns and minimize volatility – and stress.

We are happy to talk to you at any time about your portfolio. And we also would like to take this opportunity to urge you to vote on Nov. 8.

Garry K. Schaefer
October 18, 2022

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