They can be the safest investment during these trying times

I remember so vividly 2006, when gas prices reached $4 a gallon. I was studying for an advanced investment license and learned about what could send America into a negative tailspin. I was managing quite a bit of money at the time, and thought oil and gas prices would lead this country into a recession.

Because I was young and naïve, I blew off my feelings because everything at that time was in a state of boom. Stocks were reaching new heights every day, real estate was in growth territory, and the economy was sailing along. Then came March 2007. Reality struck. I remember sitting at the computer just watching 50 percent drops in what were supposed to be safe investments: bonds. I could not change a thing. Selling at this time was futile.

In my years of investments, I never saw or experienced something like this. All I could do was go out and buy a bouquet of flowers to cheer me up and get ready to make gutwrenching calls to my clients explaining what was happening. There are times, like that one, when your beliefs get tested. At the time I believed stocks, bonds and real estate were correlated differently, meaning one asset class would save the other. But all my years of schooling and belief system came crashing down. They were all correlated the same.

So, a new frontier emerged for me:

Insured indexes became the best performing asset class, beating the S&P 500 over a 20-year period. I believe today history is about to repeat itself, and buying into insured indexes will be the safest investment during these foreseeably trying times.

One of my favorite companies, Blackstone Group, is predicting a gas shortage and civil unrest. Statistics today say that 71 percent of Americans do not like what they see for the near future of America. My Americana is one where Maslow’s hierarchy of needs is met across the board, giving each of us an opportunity to reach for higher ground.

Even going to the beach costs about $25, and that does not include going out to eat, buying souvenirs or getting ice cream for the family. We need to have housing, food, clothes, automobiles, heat and water to be able to grow to the next level. As we have learned from this pandemic, this costs around $40,000, or $20 an hour, for a 40-hour workweek. My Americana is one where people have the skill set to earn $20 per hour to provide for their family. If we plan right, the next recession will be one we can make it through with as little pain as possible.

I have always said that I wanted to have gray hair as a wealth advisor. In other words, experience. (I have that gray hair now.) The 20 yearsplus as a wealth advisor allows me to trust my instincts today, including knowing what to do and buy when the markets are down, and hopefully protecting clients’ assets from losing money.

I realize what goes down must come up and selling creates a taxable event. But you only pay in gains, not your original investment.

Let’s just say that the market corrects 50 percent again. You have a balance of $500,000. A 50-percent correction puts your balance at $250,000. Then you have a 50-percent gain. Your balance is only $375,000. And we all know how long it is going to take for a 50-percent gain back. You need a 100-percent gain to get back to the $500,000. Selling your assets would likely amount to a $50,000 tax bill. I would rather pay the tax bill. By investing in an insured index, you can ride out the expected volatility safely. If your money is in a tax-advantaged retirement account, you would keep all your $500,000 and gain according to the various insured indexes you would be investing in. You would pay your taxes when you withdraw the money for retirement.

As the end of the year and the holidays approach, let’s focus on our families, get our ducks in a row and cultivate the Americana that can be the best version of what is ahead.

Margaret Tully is a Manchester-based wealth advisor.