The Most Important Lesson I Can Share About Investing Amid This ‘Money Flood’

Wednesday, June 09, 2021

You have to invest for the market environment you have, not the one you want.

Among all the investment lessons I’ve shared over the years, I think that may be the most important. Today, I want to explain its relevance.

Yesterday, I read an op-ed written by Kevin Warsh, a Federal Reserve board member from 2006 to 2011. Headlined “The Fed’s Risky Fill-the-Punch-Bowl Strategy,” Warsh’s essay addressed the negative side effects of the Fed’s current policy mix.

Rising inflation? Check. A falling dollar? Check. Out-of-control real estate markets? Check. Wild speculative behavior on Wall Street? Check. The encouragement of reckless borrowing and spending in Washington? Check.

Heck, I’ve written about all of these topics in recent months, and you can check them out by clicking here, here and here.

On top of all that, Warsh argued, the policy is completely detached from what’s going on in the real economy.

Enormous amounts of economic and market support might have made sense during the depths of the COVID-19 crash and associated economic shutdown. But they certainly don’t anymore.

Warsh’s conclusion? “The risks the Fed is taking with its winsome forecast are significant, and the consequences of policy error are severe.”

I couldn’t agree more. And yet, I’ve urged you to stay the course.

To stay invested in “Safe Money” stocks and sectors.

To continue to target income-generating opportunities in this market.

To use the opportunities created by this policy mix — while you can — to build a nest egg of wealth and financial security.

Why? Because you have to invest for the market environment you have. You can’t let your personal feelings about a particular economic policy, or politics, or anything else cloud your investment judgment.

That will only lead to lost profit opportunities and potentially large losses.

Right now, the long-term risks of the Fed’s current course of action — not to mention what’s happening with fiscal policy — are obvious to me.

But unless and until Wall Street senses a significant shift is coming — and market action starts reflecting that — you don’t want to swim against the tide.

You don’t want to fight the Money Flood.

You want to stick with an approach that’s most appropriate for this “prosper now, pay later” market.

As long as you do so in a “Safe Money” way, I’m confident you’ll build more wealth today and be in a much better position to survive its consequences tomorrow.

Until next time,

Mike Larson

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