- Shares are falling due to rising inflation, but two Carson Group executives are not panicking.
- One day, bitcoin may be “obsolete” because of a feature that most believe is its greatest strength.
- Investors should keep a cool head and avoid the three common mistakes made in the bear market.
The recent stock market crash has prompted investors to seek advice on how to protect their hard-earned savings.
It was at this point that wealth advisor Ron Carson founded the Carson Group of the same name in 1983, which manages about $ 20 billion in client assets and offers advice to financial advisers who want to navigate the market.
A couple of the company’s top executives – Jamie Hopkins, managing partner in wealth management solutions, and Nick Engelbart, chief financial officer – recently spoke with Insider about the impact of inflation on investors, why the potential transformation of bitcoins is overestimated and the three biggest mistakes. investors can do it right now.
A smarter way to think about inflation
One of the main reasons for the deterioration of stocks in 2022 is the constantly worrying issue of inflation at a 41-year high.
Price spikes, which only intensified with Russia’s invasion of Ukraine in late February, affected consumer spending and economic growth, while forcing
aggressively raise interest rates, which some economists say will push the United States into recession.
But amid all the hype about high inflation that has lasted for decades, it’s easy not to notice a few key facts about rising prices, Hopkins told the Insider. First, rising prices are largely due to supply chain problems that will be addressed over time; second, inflation varies greatly from city to city, from county to county, and from state to state; third, price increases disproportionately harm retirees and other unemployed.
These last two points are especially important for financial advisors and retail investors as they struggle with price spikes. Those who have suffered the most from inflation – whether they live in a city where prices are rising, retired and feel that their price force has fallen – may see the benefits of profitable investment and less risk in the stock market.
Ideally, investors can limit the impact of inflation on their portfolios while continuing to operate, Engelbart said, although those who do not work may stay afloat by investing in dividend-paying stocks or protecting their margins. Beneficiaries, raising prices without destroying demand.
“The best protection you can have is your true ability to earn – your ability to earn extra pay and earn more over time based on your talents and abilities,” Engelbart said. “And be sure to invest in stocks that have price strength.”
Bitcoin will not be revolutionary – but not for the reason you think
When Carson Group advisors work with their clients, their role is to educate and provide investment advice, Hopkins said, adding that no asset class is ever ruled out.
However, Hopkins said it would be difficult for him to recommend more than 1-2% distribution in cryptocurrencies, although he said he was a “big fan” of digital assets and blockchain technology.
Currently, the CEO has two major problems with the new asset class: cryptocurrencies tend to have high commissions, and he disagrees that cryptocurrencies such as bitcoin will be effective in hedging inflation in the long run.
“I still didn’t believe that cryptocurrency had enough experience to demonstrate whether it could be a hedge of inflation,” Hopkins said. “It never happened during a period of high inflation, so I think it’s very difficult to say how it will work.”
Bitcoin’s results over the past six months suggest that Hopkins is right, although the chairman of the hugely successful inflation fund recently told Insider that bitcoin is a key part of his portfolio, noting that the price of cryptocurrency is four times higher than was before the pandemic.
But in addition to his doubts that bitcoin could be a safeguard against rising prices, Hopkins has another, more original reason why he doesn’t think the original cryptocurrency will ever be able to replace the dollar: its limited supply. While many analysts argue that the limited supply of bitcoin is a major force that makes digital assets look like gold, Hopkins instead sees functionality as a commitment.
“Ultimately, that means it’s going to be obsolete,” Hopkins said, referring to fixed bitcoin offerings. “Because every time someone dies and loses a key and it gets stuck, it means that at some point you will have too many people who can no longer make transactions.”
Hopkins continued: “Now is not a short time. But if you just talk about technology and think, “Well, that’s all – this is the new currency of the future,” that’s really a huge problem. It is as if we were printing a limited number of dollar bills today. Over time, we have to print more of them, because they wear out, break down, get lost.
Although Hopkins believes that the inevitable decline in the supply of bitcoins, as people lose their keys, will not allow the digital currency to shake the world of global payments, this does not mean that it is a bitcoin bear. In fact, Hopkins said he holds 2% of his personal portfolio in cryptocurrencies, including bitcoin, although he believes the “best coding and iteration” of cryptocurrencies has not yet taken place.
“Accepting one coin – even if bitcoins hate it when I say it – is like telling me one technology where its first iteration was the end use of that technology,” Hopkins said. “It would be like saying, ‘Well, the Wright brothers made a plane, and it’s as good as it ever will be.’ “”
3 big investment mistakes to avoid
Although it is easy to remember the proven rules of successful investing, it is much more difficult to follow them, especially in times of high market volatility.
To help new and experienced investors along the way, Hopkins shared the three most common investment mistakes he sees, and Engelbart added a few words of wisdom.
The easiest way to get into trouble while investing try to calculate the marketsaid Hopkins. According to the CEO, no one has ever developed a proven market timing strategy, and the problem with selling stocks in hopes of buying them back at a lower price is that usually when investors feel comfortable investing again, stocks have bounced back. .
“People tend to do the wrong things at the wrong time,” Engelbart said, adding that the lack of even the most optimistic days for stocks can be devastating to an investor’s profits.
Hopkins also said that while there may be room for large-scale strategic sales – as if the investor is close to retirement and willing to sacrifice earnings for the sake of money security – he said that “there is almost never any excuse for excessive trade. This strategy, which includes day trading, is essentially a market time for steroids, and Hopkins said it tends to end badly.
According to Engelbart, investors should refrain from timing the market and over-trading, as history shows that “the market will do everything it needs to prove that as many people as possible are wrong.”
The last investment mistake Hopkins warned about was this not understanding the distribution of assets. It is well known that diversification is one of the keys to long-term portfolio success, but Hopkins said investors may be wrong to think that all they need to do to diversify is to own many different stocks, ETFs. or mutual funds.
But simply owning different stocks or funds that affect the same sectors or industries tends to create a “super-efficient portfolio,” Hopkins said. He advises investors to know what they own and carefully consider the contents of the fund before deciding to invest in it.