My Personal Story

JC w JFCHave you ever experienced losing half of your portfolio?

I graduated honors with a business degree from a private NY university.
I was trained in the financial services industry by one of Wall Street’s top investment firms. Yet neither was any help to me when I experienced one of the worst bear markets in the history of the stock market.

From 2000 through 2002 the S&P 500 lost almost 50% of its value while the NASDAQ lost over 75%!!

I was trained in and at the time was following the investment philosophy of our industry. It’s called the Modern Portfolio Theory and it basically states that investors can achieve their investment goals through proper diversification and investing for the long term.

Well, during that bear market my clients lost a lot of money; my family lost a lot of money and I lost a lot of money. It made me physically ill and it almost forced me out of a business that I loved.

But with every problem always comes an opportunity. I was fortunate to have been introduced to a book written by Tom Dorsey about an old investment methodology called Point and Figure analysis that dates back to the early 1900’s. Over time it changed my career and my life!

Point and Figure is rooted in the irrefutable laws of supply and demand which influence all markets whether it is stocks, bonds, real estate or tomatoes in the grocery store. The basics are the same and are common sense.  If more people are buying than selling then the price is controlled by demand and can only go in one direction, UP; and if more people are selling than buying then the price is controlled by supply and can only go in one direction, DOWN.  To make money in your portfolio you need your investments to be controlled by demand so they go up. Simple. Logical. Organized.  I liked that.  It made sense to me and I knew if it made sense to me then it would make sense to my clients. However, this is not something where you read a book and automatically make millions.  It’s a methodology that must be experienced, practiced, lived and learned over time.

I felt at the time that by using Point & Figure analysis that the markets should provide me with enough data to be able to build a model that would help protect my client’s portfolios when markets were declining before losing a lot of their value and vice versa.

My goal was to figure out a way to know when to play offense in the markets, but as importantly to know when to play defense and do so in a way that allowed my clients (and me) to sleep at night.  I never wanted to go through again what I did in the 2000 bear market.

I’ve heard some people say that it doesn’t bother them too much to see their portfolio go down because over time they believe it will go back up. They are taking a buy and hold approach.  Personally I think most of us do not have the emotional or financial capacity to deal well with seeing our investments lose 20%, 30% or 40% like in 2008.  This is nothing more than a buy and HOPE approach.  It is not a strategy, but a posture. Besides, simple mathematics tell us, that if you are able to protect the value of a portfolio during a market decline then it only makes sense that you will have more to work with when the markets go back on offense and over time you should expect to accumulate a greater nest egg with much less risk.

Given the choice which option would you prefer?

Today I can say that the principles of Point and Figure have provided me with the tools and the discipline to know when to play offense and when to play defense.  My clients know that what I do is systematic and disciplined.  There is no guess work.  They know that I am there to navigate our way through the many storms that Wall Street throws at us over time.  They know I am immersed in my practice; that I love what I do and that I am there for them.

  • Concerned with protecting your principal?
  • Unwilling to accept large losses in your portfolio?
  • Investing without a discipline and a strategy?
  • Would prefer a proactive rather than a passive management?

If so, then Carlson Wealth Management may be a good fit for you.