Navigating Investment Quicksand: Practical Tips for Freeing Your Portfolio

In this week’s episode of Retire in Texas, Darryl Lyons, CEO and co-founder of PAX Financial Group, breaks down a number of strategies to get your investment portfolio unstuck. Drawing inspiration from the challenges of navigating quicksand, Darryl applies these survival tactics to managing your investments.

Key highlights include:

*Understanding the importance of remaining calm and avoiding hasty decisions.

*Practical steps to reduce financial burden and improve portfolio performance.

*Analogies between quicksand dynamics and financial strategies for asset recovery.

*Detailed advice from a survival guide to inform investment decisions.

*How to methodically and safely transition to more promising investment areas.

Darryl’s insights aim to empower you to handle investment setbacks with strategic foresight. Tune in to unlock the secrets of maintaining control over your financial future, and visit PAXFinancialGroup.com for additional resources, including our free eBooks.

If you enjoyed today’s episode, make sure to leave a comment and share the show with a friend!

PAX Podcast Ep. 135 Transcript

Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group. Thanks for tuning in. You’re listening to Retire in Texas. Remember this information is general in-nature only. It’s not intended to provide specific investment, tax or legal advice. Visit PAXFinancialGroup.com for more information. 

Also, visit PAXFinancialGroup.com to get some of our eBooks to help further educate you on this somewhat confusing investing and financial planning world that we’re living in today. So, there’s some eBooks that we put out on there. They are free. 

Okay, so today I want to talk to you, if your portfolio is stuck in the mud – I look over a lot of portfolios, and frankly, some portfolios feel like they’re stuck in the mud. Some are successful, some are just kind of muddling along. 

So, I want to talk about what to do if your portfolio, if you feel like your portfolio is stuck in the mud, whether it’s a PAX or whether it’s somewhere else. And there’s good reason to believe it’s stuck in the mud. And we’ll talk through that. But I’m also going to give you some solutions on how to unstick it, unstuck it. 

It reminds me of like, I don’t know if you remember NeverEnding Story in the 80s, I loved that movie as a kid. And remember that horse that sank in the swamp and the narrator said, “Whoever let the sadness overtake him, they would sink into the swamp.” And then Artax, the horse, sank. It was really kind of sad and depressing. But whenever I think of quicksand or mud or something, I think of that horse in that movie. 

But yeah. Speaking of quicksand, quicksand is considered, they consider this a non-Newtonian fluid. It doesn’t follow the normal laws of fluid. It can change the – think of it like thickness. The thickness can change. 

They call this viscosity, but the thickness of the fluid can change when it’s subjected to force. And that’s why we shake ketchup bottles to create more liquidity, to change the thickness. And, you know, when you, when you’re in quicksand and you start kicking, it can get more liquidy and, you know, quicksand is just sand, that’s saturated in water. 

And that reduces some of the friction between sand particles. And so quicksand, it is stable if it’s kind of, if nothing’s going on and it’s kind of like clay. But under the right conditions this transformation occurs of vibration or – you typically, you know, movement of some sort. Then it turns from a solid to a liquid. And that’s what makes it dangerous. 

And so, what I’d like to do is I found an interesting article that talks about how to get out of, how to get out of quicksand, a complete survival guide. And there’s seven, seven steps of getting out of quicksand. And I thought, well, I think I can translate that into seven steps of getting a portfolio unstuck as well.

So that’s, that’s my attempt today is to be able to take this analogy and translate it into your portfolio. So, let’s, let’s jump with number one. Jump into number one. 

Number one is stay calm. 

Now, a rookie mistake in investing that somebody can do perpetually their entire lives is kind of freak out when they see something that’s not performing in their portfolio.

I’ve seen plenty of people in their 401(k), freak out and make changes last second, and that really damages their portfolio. A good example just happened to us recently. Now, Brian and I were working on a portfolio, and we were talking about a specific stock in there, it’s called Skyworks. Good company. Been around a while. Really techy company. And it was just struggling in our client’s portfolio. We were like, “What is going on?” 

So, you know, initial reaction, rookie mistake might be like, “Okay, sell this guy to get out of it. It’s not working.” Of course, we don’t do that, but here’s where the reality hit us upside the head. We’re doing our due diligence like a week later from the time that we ran the initial reports, when the stock was down. Brian texted me and says, “Okay, it’s up 15% since I ran that report.”

I mean, just like that, things move. It all of a sudden shot up. If we would have reacted on our emotions when it wasn’t working. We sold, we freaked out, but we didn’t. We stayed calm and sure enough, it came back. So, I think the idea of staying calm as an initial starting point for a stuck portfolio or being in quicksand, I think that’s an appropriate first step.

Number two, lighten your load. 

And I would imagine if you are stuck in quicksand, you’ve got this heavy backpack. You probably need to take that off. I would suggest to you that a burden that you might carry when you feel that your portfolio is stuck, is that you’ve got to start chasing returns. You’ve got to start finding – okay, I’ve got to figure out what is working out there. And I, and then I’ve got to, I’ve got to just start moving money over.

That’s quite a burden by the way, because not only do you have to figure out where to go, but when to go, and then how much to go. That puts a lot of stress on you. I’ve seen it over the years. It is not just simply a tactic, it is a burden.

And I understand where we’re all coming from. The irony of all of this investing world is that a principle that makes logical sense to all of us actually can be supported by biblical truth and has worked in the past is, diversification has failed us all. In fact, in the last 15 years diversification has not worked. We all would have been better off buying Nvidia or Microsoft or Apple or just a handful of these tech companies. Diversification has just let all of us down. 

And so, I’m certainly not abandoning diversification. And nor should I recommend you because what that will end up doing is burdening all of us, a different strategy to replace it. And that would typically mean chasing returns. 

I’m going to stick to the timeless principle, because I still believe diversification provides us the right amount of returns. Maybe, maybe not the most. And I, and I do believe that that’s going to be a challenging thing for any time diversification is in play. But it’ll provide the right amount of returns for the right amount of risk over an extended period of time. That I still have conviction in. So, I would say when it comes to getting stuck, lighten your load, don’t add to it. Adding to it would be the same as chasing returns. 

Number three, don’t let anyone yank on you. 

So, if you’re stuck in quicksand, somebody could offer their hand. But if they yank on you, it creates a suction effect. So that’s the same thing here.

You know, you might hear of friends that are, maybe made a good bet on Bitcoin or maybe made a big bet on, I was going to say Tesla, but they’ve been struggling this year. Whatever stock, we’ll use Nvidia again. But you don’t know the whole story. Like if I told you that my son has made 30% on Nvidia year to date, that’s exciting, but he only put it several thousand dollars in it. Right? 

So, we don’t know the whole story. We don’t know to what degree people’s risk appetite is. We don’t know if they’ve got a rich dad, so they don’t care if they lose it all. Like, we just don’t know the situation. So, don’t let anyone yank you around.

I find very few people are getting this right. This is, there’s a small, small group of people that have made really solid bets on just a few companies, but they’re few and far between. Most people are in this diversification world, with all of us saying, “Well, if I had a time machine, I’d go back and do it differently.” I think we all would. But here we are on a go-forward basis. I still believe that we’re in the right place. 

Okay, so number four, this is how to get out of quicksand right? Do move legs in a slow circular motion. 

Why? Your goal, here it is. Your goal is to free your legs. And so, I think about like when it comes to portfolios, I think we have to think about what is our goal.

And a lot of our planning modeling and a lot of planning modeling in general has a return profile. So, like, if we are able to get this type of return, let’s say 6%, 7%, 8% over time, compounded, we’ll meet our objectives in life. 

And so, coming, going back to that goal and saying, “Hey, we are, we’re in the ballpark of meeting our objectives.” Maybe we’re not hitting these 30 percents like I mentioned with the Nvidia, but we’re hitting our personal objectives then, I think we’re okay. And so, the idea is just to remember your goal in mind. 

And if you’re stuck in quicksand, you got to say, “What is my goal?” My goal is to free my legs. And if you’re talking about investing, you say, “What is my goal?” My goal is to get a certain type of return over time so I can meet my life objectives. Getting back to the basics.

Number five, this is the fifth recommendation if you’re stuck in quicksand, don’t use all your energy on pulling. 

There is a difference between holding on to somebody and pulling. And so, I think about pulling. You have an advisor. Generally speaking, a lot of people that listen to this have an advisor of some sort. Some of you guys are doing it yourself. I know who you are and you’re very competent. You probably do it for the rest of your life. But for those people that need an advisor, that want somebody to walk alongside of them, don’t pull on them.

An advisor, typically, if they’re fiduciary, they – and I can tell you, everyone at PAX sincerely, sincerely cares about the well-being of their client. You know that if you’ve hired somebody, if they care about you, if they care about their well-being, if they’re trying their best, if they’re competent. And if they check all those boxes, it’s very, it can get to a tipping point where, especially strong-willed people can just go, “You know what? I know, I hear you, advisor, but I just want to do it this way.”

We had one client who did that, and we were in a, it was like a tech portfolio. And, man, that thing just went down. And so, he was at the point and said, “I don’t want to be in here anymore. Get me out.” We try to keep him in. “Get me out of there.” Okay, fine. It’s your money. I mean, I you know, you can only, you know, coach you so far. “Get me out of there,” he said. Pulled him out, put him in a different portfolio. Guess what happened to that tech portfolio? It shot up like a rocket ship right after he got out.

So, you know, that stuff happens. And so, pulling on advisor, I think at a certain point, you know, it just – again, it’s kind of hard because it’s your money but just remember that we will, advisors will honor your wishes, but we, you know, as fiduciary as we are looking out for our client’s best interest. 

Number six, do hold on to something.

A rock, a tree, a rope. And so, if you were going to hold on to something, like if you were to anchor on a number – I see a lot of very wealthy and successful people, they don’t focus on that return so much year to year. They really focus on that net worth. Is my net worth going up?

And so we at PAX run net worth statements all the time. So just start looking at that net worth and see where that’s trending. You have much more control over your net worth, you know, assets that are invested in the market or just usually a piece of the overall picture. Your net worth is also driven by your spending or your, the lack thereof. If you’re reducing your spending, your savings, paying down debt, there’s a lot of factors that go into net worth. So, if you’re going to hold onto something, hold on to your net worth. 

And finally, number seven, don’t take large steps. 

If you get one leg out of quicksand, don’t just jerk the other one out. You could tear a ligament.

And so, what I like, the way I’d like to bridge this analogy is say, look, if you do get to a point, your advisor says, “Hey, we, we have a thesis. Our theory is, is this, artificial intelligence boom is going to continue for the next several decades,” and I need more exposure to some of those big tech names. If you’re going to make that transition based on, you know, the conviction that you have, I think that’s okay.

I’m personally not chasing the returns. Maybe I’ll regret it, five years from now, I’m sticking with my portfolio. But for those that say, you know, I really want to have exposure there and then do it in a way that’s, that’s maybe more thoughtful than just kind of, you know, selling everything and move it over. Maybe just ease it over a little bit at a time.

And I think that’s probably a more practical way to do it. Maybe just say, “Okay, I want less international and more tech.” Then, then you can do that. Just do it in a very logical, thoughtful, cerebral, unemotional, and objective way. Maybe, you know, every quarter I’m going to move 10% or 5%. Just think of some formulaic way to shift over to some new theory, new thesis, or new conviction that you and your advisor have agreed upon. But, but doing a large step. You might tear a tendon. 

So, I hope that helps. Those are the seven steps to get out of quicksand and how I, wanted to bridge those over to getting stuck in a, in a portfolio rut. 

Number one, stay calm. 

Number two, lighten your load. 

Number three, don’t let anyone yank on you.

Number four, do move legs in a slow, circular motion. Remember, your goal is to free your legs. 

Number five, don’t use all your energy on pulling. 

Number six, do hold on to something. 

And number seven, don’t take large steps. 

So, there you go. Hope you never get stuck in quicksand and hope your portfolio, if it has been stuck, hopefully we’ll all collectively work to get it unstuck. It may take time, but I’m confident that diversification will work overtime. Stay focused on your goals. Stay focused on your plan and remember that you think different when you think long term. Have a great day.

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