Always Carry Your Knife to Survive an Anaconda Attack

written on June 01, 2009 by Frank Fantozzi

Rate this Article

  • 1
  • 2
  • 3
  • 4
  • 5

Related Items

Alphabet Soup... How to Choose a Financial Advisor
written on June 06, 2011 by Frank Fantozzi
Why is Unemployment Stuck at Nine Percent
written on February 10, 2011 by Frank Fantozzi
What I Enjoy Most About Being a Difference-Maker as an Entrepreneur
written on January 27, 2011 by Frank Fantozzi
Market Update
written on September 28, 2009 by Frank Fantozzi
Always Carry Your Knife to Survive an Anaconda Attack
written on June 01, 2009 by Frank Fantozzi
Doom Gloom and Opportunity
written on April 30, 2009 by Tom Gilbride
Are Recovery Efforts Showing Results
written on April 09, 2009 by Frank Fantozzi
Why Consider Life Settlement Options
written on March 09, 2009 by Frank Fantozzi
How to Weather a Stock Market Correction
written on February 25, 2009 by Frank Fantozzi
Financial Stability Plan Not Clear Yet
written on February 25, 2009 by Frank Fantozzi
A Graph on Total Annual Returns for the S and P 500
written on February 25, 2009 by Frank Fantozzi
Good News Bad News Where we are now 262009 Market Update
written on February 09, 2009 by Frank Fantozzi
What Kind of Estate Plan Makes the Most Sense for You
written on May 05, 2008 by Tom Gilbride
Gross Margin The Potential for Profit
written on March 24, 2008 by Tom Gilbride
Cost of Goods Sold What does it cost to do what you do
written on March 03, 2008 by Tom Gilbride
The Top Line It All Starts Here
written on February 25, 2008 by Tom Gilbride
Profit Cash Wealth Running Your Business by the Numbers
written on February 18, 2008 by Tom Gilbride

View All

More By This Expert

If You Won Millions in the Lottery What Would You Do | Wealth Planning | Small Business
written on April 17, 2012 by Frank Fantozzi
Investing Through the Economic Cycle
written on March 29, 2012 by Frank Fantozzi
What Does 2012 Hold For Your Personal Financial Standing?
written on March 05, 2012 by Frank Fantozzi
Is a Family CFO the Right Solution for Your Complex Wealth Management Needs?
written on December 01, 2011 by Frank Fantozzi
Is it Time to Sell? Knowing when to get rid of a security requires strategy
written on October 28, 2011 by Frank Fantozzi
The 2012 Election Could Bear Heavily for Investors
written on October 13, 2011 by Frank Fantozzi
The Downgrade What You Need to Know
written on August 28, 2011 by Frank Fantozzi
Debt Ceiling Raised
written on August 05, 2011 by Frank Fantozzi
2011 Mid-Year Economic Outlook A Mix of Clouds and Sun: On Track
written on July 13, 2011 by Frank Fantozzi
Are We in a Stock Market Pullback?
written on June 22, 2011 by Frank Fantozzi
Alphabet Soup... How to Choose a Financial Advisor
written on June 06, 2011 by Frank Fantozzi
Where to Start! Certified Divorce Financial Analysts: Save Valuable Time and Money in a Divorce Process
written on May 13, 2011 by Frank Fantozzi
Markets Transitioning into Spring
written on May 02, 2011 by Frank Fantozzi
Is Collective Bargaining Healthy for Taxpayers and our Financial Markets?
written on April 12, 2011 by Frank Fantozzi
Fight or Flight... Should I Stay in the Market or Run and Hide?
written on March 15, 2011 by Frank Fantozzi
Keep Emotions in Check When Making Investment Decisions
written on March 04, 2011 by Frank Fantozzi
Why is Unemployment Stuck at Nine Percent
written on February 10, 2011 by Frank Fantozzi
What I Enjoy Most About Being a Difference-Maker as an Entrepreneur
written on January 27, 2011 by Frank Fantozzi
2011 Economic Outlook- A Mix of Clouds and Sun
written on January 12, 2011 by Frank Fantozzi
Year End Financial Reminders
written on December 20, 2010 by Frank Fantozzi
Managing Wealth Across Multiple Generations
written on December 02, 2010 by Frank Fantozzi
Post Election Thoughts and the Market
written on November 23, 2010 by Frank Fantozzi
One and a Half Cents on the Fourth Quarter
written on November 08, 2010 by Frank Fantozzi
What Kind of Government Do You Want Use Your Right and Vote on November 2nd
written on October 29, 2010 by Frank Fantozzi
Politics and Taxes
written on October 16, 2009 by Frank Fantozzi
Market Update
written on September 28, 2009 by Frank Fantozzi
Market Update July 2, 2009
written on July 16, 2009 by Frank Fantozzi
Is the Market Turning Around?
written on May 07, 2009 by Frank Fantozzi
Are Recovery Efforts Showing Results?
written on April 09, 2009 by Frank Fantozzi
Why Consider Life Settlement Options?
written on March 09, 2009 by Frank Fantozzi
How to Weather a Stock Market Correction
written on February 25, 2009 by Frank Fantozzi
Financial Stability Plan: Not Clear Yet
written on February 25, 2009 by Frank Fantozzi
Total Annual Returns
written on February 25, 2009 by Frank Fantozzi
Good News, Bad News: Where we are now? 2-6-2009 Market Update
written on February 09, 2009 by Frank Fantozzi
Private Foundations and Donor Advised Funds...They are not just for the rich and famous
written on January 12, 2009 by Frank Fantozzi
Planned Financial Services Market Update 12-22-2008
written on December 22, 2008 by Frank Fantozzi
Market Update 12-1-2008
written on December 04, 2008 by Frank Fantozzi

View All

Sometimes our natural reaction to a threat is not the best one.  With the liberal press screaming recession and the supposed economy experts scattered with opinions leaving people puzzled, investors are asking themselves, "Should we run from the market?".  I heard this great story, which I hope will provide you with some guidance in handling your personal investments.

There exists a Peace Corps Manual which is given to its volunteers.  It is kind of a survival guide so wherever a volunteer's tour takes them, there will be tips on how to deal with basic survival.  In the book's table of contents you will find sections devoted to: "How to Build an Igloo" and "Where to Find Water."  Curiously enough, there is a section devoted to "How to Survive an Anaconda."  Since the largest anaconda on record is 37.4 feet long and weighs more than 500 pounds, if you were to come across one in the Amazon, your reaction is probably similar to mine - run and don't look back!

Many feel the same about the market, but here begins the problem.  The market, like the anaconda, is faster than you.  The market is efficient, and by the time you realize what is happening in the market, changes have already occurred.  If that is the case, what should an investor do?

Let's see how the Peace Corps suggests we survive an anaconda attack.

  • Lie flat on the ground.  Do not panic.  The anaconda will begin to climb all over your body.  Be calm!
  • After the anaconda has examined you, it will begin to swallow you, beginning with your feet.  Be calm!
  • The anaconda will suck your feet into its body.  Be still!  This will take a long time.
  • When the anaconda has almost fully swallowed your legs, calmly remove your knife and kill the snake.  Once killed, slide yourself out from the snake.  Be sure you have your knife!

Now you ask, what does this have to do with surviving a bear market attack?

  • If attacked by a bear market, do not run.  The bear market is faster than your money.
  • Lie flat on the ground.  The bear market will begin to climb all over your money.  Be calm!
  • After the bear market has examined your money, it will begin to swallow your money.  Be calm!  This will take a long time.
  • When the bear market has almost fully swallowed your money, calmly remove your knife and kill the bear market.
  • Be sure you have your knife!

So besides being calm (sure), you need a "knife."  And in a bear market attack, your strategy is your knife.  Most investors assume they can scatter their investments in various categories and they will be properly diversified.  Many do not realize that the various categories represent pieces to a puzzle, and that there is a science to developing a sound strategy.

How investments combine is one of the biggest decisions in investment planning.  It is the puzzle, not the pieces, that is crucial.  Just because you have two different investments that do well individually and do not correlate, does it make sense to combine them?  What often occurs with investors is Di-WORSE-ification.  Good things help you less than bad things hurt you.  By assuming that you can just scatter different types of investments for your allocation, does not assure you that your portfolio will perform well.

Focus on the puzzle, not just the pieces, and reorganize:

Pieces                                           Puzzle

Due diligence                            Optimal combinations

Recommendations                    Manager bias mitigation

Attribution                                Behavior diversification

Manager search and visits         Portfolio creation

What doesn't work in building a diversified portfolio?  Basing decisions just on investment correlation and investment overlap.  What does work in building a diversified portfolio?  Bias mitigation and behavior diversification.  What is involved?  Look at scenario attribution.

How often and how much do certain factors contribute to the investment outperforming the benchmark?  Some examples are: What region or sector is the fund investing in?  What asset classes and sectors are involved?  When does currency come into play?  When do positive and negative market conditions come into play?

What else can help?  How about more asset allocation changes and thinking outside the style box?  In addition to alternative investments, utilizing all-cap, opportunistic global and SMIDS can help develop a sound investment strategy.

Lastly, in designing your strategy, do you focus on downside risk, tax awareness, social responsible investing, alpha-driven or income?  These factors need to be considered.

The lesson learned is being prepared and having a defined strategy so when the bear market attacks, you will have your "knife."