An Ounce of Prevention

Old adages, pearls of wisdom or axioms that survive for any length of time are there for a reason. They usually speak volumes of truth. An important one for our portfolios is: “an ounce of prevention is worth a pound of cure”. I’ll come back to this in a minute.

Important News? Fiscal cliff, raising the debt ceiling, Europe recession, and record Fed intervention, all hyped to get our attention. What will be the next big story line? Does it even matter? Or are there long term trends in place that have to play out more important? Here is the most important question: is your portfolio, even in bonds, susceptible to another big market loss?

Even without all the unusual events in the world today, recessions and bear markets occur in “normal” times. Since 1929 16 bear markets, declines in the S&P 500 greater than -20% and averaging a -38.24% loss, have occurred on average every 4.8 years. They are worse during periods of time with extraordinary events like we’ve seen since 2000.

Our research shows that on a price basis on the Dow Jones average, 60% of the time since 1929 we are just trying to recover from a market downturn. Hard to believe? From Google Finance 12/19/2012, if these markets lost 20%:

  • The Dow Jones would be back to 12/31/99 levels – 13 years ago
  • The S&P 500 would be back to 12/31/98 levels – 14 years ago
  • The NSADAQ Composite would be back to 06/30/99 levels – 13.5 years ago
  • The NASDAQ still needs to go up 40% from current levels to get to its March 2000 high

What if it’s another 10 years before we get a good old fashioned bull market? To me this is the biggest risk we face, losing another 10 years getting to the same place. By the way, has your advisor or anybody ever explained this to you?

Back to the previous axiom: “an ounce of prevention is worth a pound of cure”. One of my friends related a story to me recently about having to go and round up the milk cows sometimes back at their farm as a kid. The cows would stay on the other side of the creek too long. In the summer it was actually fun to have to go get them and get thoroughly wet. But in the fall they started laying stones across the creek away from where the cows crossed so in the winter they didn’t have to get wet and freeze to do it.

Our thought is it doesn’t hurt to be laying a few stones just in case winter sets in or “an ounce of prevention is worth a pound of cure”. Since there is so much time at stake would it be worth 90 minutes of your time to possibly find a way that might make the next ten years better? Since the last 12 years have been on the difficult side, say a testing ground for good investment strategy, wouldn’t it be nice to know which strategies did really well?

We periodically do the “Most Important Workshop I’ve Done in 30 Years”. If you would like to attend one of our sessions please give us a call at 520-325-1600 or email

You will walk away with an understanding of these four concepts:

1. How long term market cycles behave differently, risks and opportunities

2. Why our emotions betray us

3. What it will look like when the next bull market starts

4. What will bonds do during this cycle, they helped until now.


Investing involves risk including the potential loss of principal. No strategy can assure success or protects against loss.

Indices referenced are unmanaged indexes which cannot be invested into directly. Past performance is no guarantee of future results.

Investment Advice offered through Shepherd Wealth Group, a registered investment adviser doing business as Shepherd Wealth & Retirement.

photo credit: Julia Manzerova via photopin cc

About Dave Shepherd, ChFC, CFP®

Dave is the founder of Shepherd Wealth & Retirement in Tucson, Arizona. Dave is a Chartered Financial Consultant (ChFC) and Certified Financial Planner™ practitioner (CFP®). Have a financial question? Click Here to contact Dave Shepherd.

Investment advice offered through Shepherd Wealth Group, a Registered Investment Adviser doing business as Shepherd Wealth & Retirement.

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