The Risk of Playing it Safe––Stone Wealth Management

The Risk of Playing it Safe

By Stone Wealth Management, Texoma LIVING WELL Magazine

James Thurber, American author and cartoonist, said, “There is no safety in numbers, or anything else.” Yet many investors hold large allocations in cash or cash alternatives without realizing the risk involved. By focusing on keeping their money absolutely secure, they may compromise long-term financial goals, forfeiting potential earnings and losing opportunities.

On the surface, it may seem logical to bury your cash in the backyard, where you get out exactly what you put in. After the recession that began late in 2007, cash, CDs, money markets and T-bills looked, to some, like a “safe haven.” That sense of perceived safety even caused some to stay out of the market longer than originally intended, and well after potential risks declined. In fact, fixed income investments may now carry more risk than in the past, and having excessive cash alternative holdings can be more costly than you might think.

Considering that the recession is over and the stock market has been on an upward trend for four years, holding too much of your portfolio’s value in cash may actually have a negative impact. “We believe clients should have some liquid assets in their overall portfolio, says Juston Dobbs, MBA, CFP®, Vice President – Investments. “It’s important for young people  to keep three-to-six months’ living expenses in an emergency savings account and for our older clients, we recommend up to a year’s worth of living expenses.”

But some people save far beyond the recommended amount because they are unsure of what else to do. It can be an expensive decision. “There’s a term called ‘purchasing power erosion’,” Dobbs continued. “It’s a combination of the effects of inflation amidst consumer price increases and the limited yields people can expect from cash alternatives, especially when money is locked into instruments with very low return for long periods of time. While we don’t want to ignore market risks, we also want to ensure that your portfolio isn’t avoiding risks to such an extent that it undercuts your objectives.”

Additionally, there is the potential opportunity investors may lose by not taking advantage of better-performing assets. Stone Wealth Management encourages clients to focus on longer-term goals and adhere to a proper asset allocation (investment mix) developed to fit individual circumstances. A well-diversified, systematic and balanced approach is a good way to allow for personal risk tolerance while positioning according to financial goals.

Dobbs suggests that one important feature of an investment plan is regular portfolio rebalancing. It’s important to understand the reasons behind rebalancing and how it can strengthen a position. “We will talk with you about any changes in your life that might affect your long-term goals,” he says. “We’ll talk with you about changes in your portfolio, such as positions that may have grown beyond their desired size. We can take some of those profits and add exposure in asset classes and sectors where your portfolio might have become under-allocated relative to your targets. That way, we help position you with the appropriate investment mix across a variety of markets, which helps ensure diversification.

“Although most people understand that markets have cycles, some investors still make emotional decisions, wanting to pull out when things appear gloomy and then trying to time their re-entry back into the market when things are rosy again,” Dobbs continues. “It can be emotionally exhausting, as well as unproductive. A disciplined process is so important for helping people reach their long-term goals.”

Burying your money in the backyard can cost you. While there are no guarantees, seeking professional advice from experienced professionals makes sense. Stone Wealth Management Group of Wells Fargo Advisors, LLC suggests, “The Smartest Investment is a Conversation.” The team is comprised of David G. Stone, AAMS®, Senior Vice President – Investment Officer, Juston J. Dobbs, MBA, CFP®, Vice President – Investments, and Lindsey Banks, Senior Registered Client Associate – Assistant Vice President. Their mission is to offer a multi-generational, multi-dimensional approach to providing unbiased strategies to meet the lifestyle, financial goals, and investment needs of their exceptional clients.

“We became financial advisors to help people make good, well-informed financial decisions,” Dobbs says. “It’s enormously fulfilling to help people put the pieces of their financial puzzle together.”

Consider the benefits of having an experienced team of financial advisors working for you. Call Stone Wealth Management Group of Wells Fargo Advisors, LLC, at 903-893-6682 to find out more. Or visit their website at

Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity.

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-banking affiliate of Wells Fargo & Company.


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