“There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”
– Colin Powell
Managing a Variety of Risks
By Dennis Wolfe, CPA, CFP & Evan Russell
In the popular film “Field of Dreams,” there is a scene that illustrates the presence of risk. A rookie comes to bat for the first time in a major league baseball game. Overconfident, he winks at the pitcher, who responds by throwing a ball that nearly hits the rookie in the head. He steps out to get a breath before getting back in. The pitcher throws another high-and-tight pitch that is even closer to hitting him. The manager, Shoeless Joe Jackson, then calls time and walks over to the frightened batter. The wise mentor explains that the pitcher did not want to hit the batter but only wanted to make him uncomfortable. He advises the kid to look for a “low-and-away” pitch, but as the rookie turns back to the batter’s box Shoeless Joe adds, “But watch out for a fastball in your ear.” With a man on third, he hits a “low-and-away” pitch to right field to score the run. The rookie experienced the importance of recognizing and playing through risks and was not prevented from having success.
The past few years have presented a range of investment risks; some of which are familiar, while others have been less common in recent times. The Federal Reserve has undertaken measures to tackle inflation, and as a result, bond prices, which have traditionally been viewed as a secure investment option, have declined significantly. Moreover, the ongoing conflict in Ukraine and the shifting dynamics of the global economy, which cast doubt on the supremacy of the U.S. dollar, have further complicated the investment environment. Consequently, navigating investment risks has become more challenging due to the intricate interplay of these factors. Here, we will explore how investors can more effectively distinguish between mere possibility and actual probability and “play through” these and other risks.