Who’s controlling your retirement? More specifically, who’s controlling your 401(k) or IRA? You? The mutual fund managers handling your 401(k) portfolio? The plan administrators of your IRA?
The answer is none of the above. The biggest factor controlling your retirement is the media and public perception and sentiment.
Abraham Lincoln once said, “Whoever molds public sentiment goes deeper than he who enacts statutes or pronounces judicial decisions.” Those words have never rung truer. So, recent talks of recession from some of the biggest names in finance must be unsettling for potential retirees whose retirement portfolios were wiped out by the last Great Recession in 2008, when the stock market shed more than 50% in value.
Here are the latest headlines stoking recession fears:
“There are storm clouds ahead for the economy,” JPMorgan Chase CEO says. –cnn.com.
“The process of bringing down inflation will bring on a recession at some stage, as it almost always has,” former Treasury Secretary Larry Summers said. –cnn.com.
Market sensitivity to media-stoked public sentiment is nothing new, but that sensitivity has only grown more and more acute since the advent of the internet and social media.
Here are examples of how comments on social media and the press have tanked the stock market in the past:
- In 2013, the Dow fell 143 points when hackers sent a message from the Twitter feed of the Associated Press, saying the White House had been hit by two explosions and that Barack Obama was injured. The fake tweet, which was immediately corrected by Associated Press employees, caused a sensation on Twitter and in the stock market.
- In 2022, a tweet from a fake big pharma account tanked the stocks of the real one and adjacent companies when Ely Lilly purportedly was excited to announce that Insulin was now free.
- There are too many instances to list the many times Elon Musk moved the market with a single tweet.
If it’s not already apparent, the media and fickle public sentiment make it so 401(k)s and IRAs sit on the foundations of sand. The smallest movement in the foundation can shift the retirement fortunes of millions of potential retirees.
It’s not just the media that moves the stock market. Economic indices, consumer confidence, and political turmoil sway stock value more than any underlying economic fundamentals, facts, or numbers. It only takes a single incident or remark to drop your portfolio multiple percentage points within a short amount of time.
To avoid shifting sands, savvy investors allocate away from stocks hypersensitive to the media and turn to more solid assets built on concrete foundations insulated from the media and public sentiment.
To avoid the madness of the crowds, smart investors turn to commercial real estate (CRE) for steady cash flow and growth insulated from media-induced market volatility. The liquidity of stocks is the biggest reason for their susceptibility to the media. That’s why sophisticated investors favor illiquid assets like CRE and passive investments in CRE for insulating retirement portfolios from herd behavior.
Investing in CRE relieves investors from the stress of media-created frenzies and mania and insulates income and capital in volatile and recessionary times.
Illiquid assets like CRE neutralize the effects of market triggers that wreak havoc on public equities and retirement portfolios. Instead of leaving the fates of their portfolios to the Wall Street gods, smart investors take control of their portfolios by avoiding the effects of crowd behavior in favor of CRE, where economic fundamentals and concrete analysis determine values.
Investors concerned about investing in CRE themselves need not despair. Private investments in CRE – when done passively through equity participation in a private company allows savvy investors the opportunity to enjoy the benefits of CRE, such as the opportunity to earn above-market returns at reduced risk along with tax benefits but without the high capital requirements and steep learning curve required when doing it on their own.
Who is controlling your retirement portfolio?
If it’s the media and the hordes, then it’s time to take back control. When was the last time you saw CRE drop 30%-50% in value in a matter of days and weeks?
Turn to CRE for above-market returns insulated from market triggers like the media.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.
