Always be Prepared for a Storm

​With all this talk about building walls, I thought I might share my own experience with walls. When I was 25 I decided to build a block wall around my yard. I wasn’t skilled in masonry, so it took a long time to lay each row. I built the wall in 20-foot sections and installed rebar every four feet so that I could pour concrete down the holes in the cinder block, which would tie the whole structure to its footings.
When I had finished the first 20-foot section I stood back and admired my work. It gave me a great sense of accomplishment. Now it was time to fill the rebar cores with concrete. As I thought about all the work involved in mixing that much concrete, and then trying to pour it down those holes, the tops of which were six feet high, my enthusiasm for the project waned. There was so much more excitement in seeing the new sections of wall go up that I decided to continue on with the next row. I figured that at some time in the future I would find a friend to help me fill the cores.
Working in the evenings over the next six months I managed to finish eight more sections of wall, giving me significant privacy around my yard. The more sections I completed, the more excited I got with my beautiful wall, and the more pride I took in my masonry skills. The hard and unappreciated task of filling the cores could wait.
Then it happened. I awoke one morning to one of those horrible Las Vegas windstorms. After one huge gust shook the house, I looked out my window to see my entire six foot high cinder block wall laying in pieces in my yard. The painful lesson of that image will never be forgotten.
A good portfolio, like a block wall, needs a core of solid holdings to anchor it in times of storm. Core investments are long term, sometimes slower moving investments, that often pay steady dividends. They are not sexy and rarely make the “pick of the day” in those monthly newsletters, but they play a critical role in long term financial planning. Plodding along in the background, the core provides consistency and stability that helps to protect you when market winds blow.
After years of market growth, investors sometimes allow their more aggressive assets to begin dominating their portfolios and forget to keep adding those less exciting, but very important, core holdings. One way to know if you are getting out of balance is how closely your account tracks the daily market movements. If your account balance is highly correlated to the stock market, you may want to consider making some changes before the next economic wind storm comes barreling through. Those who patiently hold a good core of sometimes less exciting investments are more likely to wake up the next day and find their financial walls still standing.