This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer
“It’s one of the best defenses on paper that we’ve had,” said Aaron Rodgers during training camp in August.
“On the field it looks even better,” extrapolated safety Darnell Savage.
And then the reality of the regular season set in.
Currently the Packers defense ranks 27th (out of 32 teams) for points allowed per game, 31st for rushing yards allowed per game, and 4th for passing yards per game. That last ranking seems like a positive, but it really just means that opposing teams are calling more running plays due to their consistent success.
Football teams that look one way on paper can actually be different in reality. Portfolio returns can also be viewed from both a paper and a real perspective.
When your December 2021 statements arrived in January of this year, they were stacked full of paper gains from 2021.
If you are like most people, you admired those gains and perhaps even accepted them as real. However, your investments’ paper values vary with financial markets, and 2022 has been a rough year.
For many, the paper gains of 2021 have turned into the paper losses of 2022.
Just as paper gains can bring overconfidence, paper losses can create unnecessary despair. The good news is that over time paper gains tend to follow paper losses for those with patience.
When do portfolio paper gains or paper losses become real? When investment assets are sold and converted to cash.
There are many excellent reasons to convert paper gains into real gains by selling investments. You may need to fund monthly cash flow, make a major purchase, or replenish your emergency fund. These conversions are typically planned well in advance and thoughtfully implemented.
There are many excellent reasons not to convert paper losses into real losses by selling investments. These conversions are typically knee-jerk reactions conducted under the illusion that they “temporarily prevent” more paper losses. They are implemented haphazardly based on unfettered negativity and over time tend to permanently prevent future paper gains. These conversions should be avoided.
While the “best on paper” Packers’ defense has had a rough season so far on the field, you can still create the potential for a winning season next year by sticking with your long-term investment strategy despite the paper losses of 2022.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
Quote of the week:
Jim Masturzo: “Volatility should not be confused with risk. The permanent loss of capital, which happens when investors succumb to fearful thoughts and thus sell at inopportune times, is the investor’s true risk.”
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