THE SPECIFICS OF AVOIDING BIG LOSSES

Every investment has four possible outcomes: a big gain, a small gain, a small loss, or a big loss. At Pacific Park Financial, Inc., our active investment strategy targets big gains, small gains, and small losses, while managing risks to sidestep monstrous declines.

Financial media often suggest investors are powerless, advocating a “buy, hold, and hope” approach that relies on accepting severe downturns. We disagree. While stock price movements are unpredictable, you can manage investment outcomes through disciplined strategies.

There are three investment environments:

1. Low Risk: Common in early bull markets, where stocks are fairly valued and technical indicators signal optimism. A moderate portfolio would reflect higher risk targets, such as 70% stocks (across small-cap, mid-cap, large-cap, domestic, international, and emerging markets) and 30% income assets (including investment-grade bonds, high-yield, convertibles, and preferred shares), with minimal cash.

2. Elevated Risk: Typical in late bull markets, where stocks are overvalued and technical indicators show mixed signals or warnings. We reduce risk by:

• Shifting to less volatile assets, like large-cap domestic stocks and high-quality bonds.
• Raising cash (10%–20%) to lower volatility and prepare for buying opportunities when risks subside.
• A moderate growth portfolio might hold 50%–55% large-cap stocks, 30%–35% high-quality income assets, and 10%–20% cash.
  
  

3. High Risk: Often marked by bear markets, with technical indicators in “sell” mode. We protect principal by:

• Increasing cash or cash equivalents significantly.
• Incorporating alternative assets such as gold, the Swiss franc, and U.S. Treasury bonds.
• A moderate growth portfolio might reduce stocks to 35% (half the low-risk target).