This past month as been a rollercoaster, first, we were all in anticipation of Donald Trump’s “Liberation Day”, then on April  2^nd we began processing this information, and since then the markets have been reeling in response to what is assumed to be a global growth killer.

                In times of turmoil , it is  easy to panic and respond by fleeing to safety. We are quite literally programed to do so in our flight or fight response. As investors it is in our best interest to “remain calm and in our seats” while the market adjusts to the new tariff regime.. One might look to the Oracle of Omaha, Warren Buffett, for advice on investing in tumultuous markets. Warren was once quoted:

“A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.
“But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
“Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying.
“This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

                It would be wrong to imply however, that Warren Buffett is in favour of the ongoing tariffs and a global trade war. This is not the case. Despite markets being lower and as a result stocks and other investments being relatively cheaper, the mechanism by which we have arrived at this point should give one pause. These tariffs and their retaliatory siblings are taxes on consumers and will likely lead to diminish demand and add to inflationary pressures in the economy..

The good news is, in our view, the long-term prospects for investing in capital markets is still very optimistic. Fleeing to the stability of  fixed income investments might provide temporary relief from volatility, but it will also mean giving up an ongoing income stream of dividends that will continue to shore up accounts in times of volatile markets, not to mention to loss of future growth. Our approach of ensuring that every investment in an investment portfolio pays some form of an income stream, that includes both fixed income investments and dividend paying equity investments, provides us two primary benefits.

Firstly, the income stream provides an ongoing cash flow into the investment accounts that can be used to sustain ongoing withdrawals to fund an investors lifestyle. This income stream is meant to provide relief from just such volatile times as we currently find ourselves in.

Secondly, the income stream provides the ability to reinvest income on an ongoing basis, if not all or any of the income is being drawn out for lifestyle expenditure. This means that as prices fall, the income provides our investors with the ability to “buy low”, which is exactly what one would want to do when given the opportunity.

All of these reasons, and more, lead us to believe that continuing to stay invested and sticking to the investment plan will get us through the temporary turmoil we have seen in recent weeks. If you have known the Kozak Financial Group for long, you know that we are practitioners of our own advice. We are fond of saying that “we eat our own cooking.” The investment accounts of our team are invested the same income generating approach as that of our clients. This means that current clients and prospective clients can feel assured that we are still very confident in our approach and will continue to act as the steady hand on the wheel.