Embracing Risk

Welcome to this week's edition of The Weekly Trail Report, where we share,

1 Story, where real stories of architects and engineers meet tailored financial strategies,

1 Actionable Tip, to provide actionable insights and guide you towards financial success,

1 Financial Term, to demystify key concepts and empower your decisions.

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1. Story: Marcus Embraces Risk

When I first met Marcus, an engineer with a stable career and a steady income, his cautious nature was evident. Like many in his field, he preferred precision and certainty. But when it came to investing, his natural risk aversion was holding him back.

“I’ve been putting money into my 401(k), but honestly, I have no idea if I’m doing it right,” Marcus confessed during our initial conversation. “I’m investing conservatively because it feels safer, but part of me wonders if I’m missing out.”

Marcus had built a modest nest egg in his 401(k), but he kept his allocation heavily weighted in low-risk, low-return options. Outside of his retirement account, he was hesitant to invest at all. He wanted to grow his wealth but felt paralyzed by the fear of losing money.

“It’s not that I don’t want my investments to grow,” he admitted. “I just don’t want to make the wrong move and regret it.”

We discussed his fears, and it became clear that his reluctance stemmed from the uncertainty of market fluctuations and a lack of understanding about how to navigate them. Marcus needed a plan that would allow him to feel both safe and strategically positioned to grow his wealth.

I introduced him to my risk framework, which isn’t about being permanently conservative or aggressive. Instead, it’s about allocating risk based on the economic environment and adjusting the portfolio as market conditions shift. “It’s not a set it and forget it approach,” I explained. “There are times to play it safe and times to be bold.”

Together, we created a more aggressive portfolio, with the understanding that we would shift to a more conservative stance as the market environment changed. This approach allowed Marcus to pursue greater growth opportunities now, while knowing we would adapt his investments as circumstances evolved.

As we developed his plan, Marcus’s perspective began to shift. He realized he didn’t need to be locked into a single risk level for the next 10 or 20 years. By allowing his risk tolerance as warranted, he could strategically navigate market changes rather than feeling cornered by them.

A few months later, Marcus reached out. “I’ve been keeping an eye on my portfolio, and I feel confident about it for the first time,” he shared. “Understanding when to take risks and when to hold back has made all the difference.”

Marcus’s journey from hesitant to confident investor wasn’t just about picking the right stocks or funds; it was about transforming his relationship with risk. With a dynamic strategy in place, he’s now positioned to embrace both growth and security—and, most importantly, he feels empowered to make decisions that align with his goals.

2. Actionable Tip: Playing Offense vs. Defense in Your Portfolio

Investing isn’t about choosing one risk level and sticking to it forever. Knowing when to play offense (be more aggressive) or defense (be more conservative) can help you make the most of changing market conditions.

In a favorable economic environment, playing offense by increasing exposure to growth-oriented assets, like equities, can allow you to capitalize on opportunities. But when the market outlook is uncertain or downturns are likely, it may be time to shift to a defensive strategy—favoring safer assets like bonds or cash equivalents to protect your portfolio.

This dynamic approach lets you adapt to market shifts, pursue growth when the time is right, and protect gains during periods of volatility. Embracing this strategy means you’re not rigidly tied to one risk level, helping you feel confident and in control, no matter what the market does next.

3. Financial Term: The Business Cycle

The business cycle is the natural rise and fall of economic growth over time. It’s a series of phases that every economy moves through, impacting everything from employment to asset values and, ultimately, investment strategies.

Understanding the business cycle helps you see where we are in the economic landscape and how to adjust your investments accordingly.

The cycle typically includes four key phases:

1. Expansion – The economy is growing, jobs are plentiful, and consumer confidence is high. Asset prices, like stocks and real estate, often see strong growth during this phase.
2. Peak – Growth reaches its high point. The economy is doing well, but underlying pressures (like inflation or debt) start building. Assets may be overvalued, and growth may slow.
3. Contraction – Also known as a recession, this phase sees declining economic activity. Unemployment rises, spending falls, and markets tend to pull back. Defensive assets or cash can be advantageous during this time.
4. Trough – The cycle bottoms out, setting the stage for recovery. This phase is often marked by stabilization in prices and interest rates, creating potential buying opportunities before the next expansion.

Investing with the business cycle in mind means adjusting your strategy based on these phases. For example, you might seek growth assets in expansion but shift to safer investments during contraction. Recognizing where we are in the cycle helps investors take advantage of opportunities while also protecting their wealth from economic downturns.

Happy Trails,

Ryan

Disclaimer: We employ fictional characters to illustrate financial concepts faced by individuals in the architecture and engineering industry. Any resemblance to real persons, living or dead, is coincidental. While the stories are inspired by our experiences, the specific details, circumstances, and outcomes mentioned are entirely fictional and created for educational purposes only. Real client information is strictly confidential and never disclosed without explicit consent. Our aim is to provide relatable examples for educational purposes, respecting the privacy and confidentiality of our clients. This information is presented for educational purposes only and is not to be considered financial, tax, legal, or investment advice.