FINANCE
WordSmith Communications owner Rachel Smith keeps up to six months of cash on hand as her financial safety net .
But for amateur investors , betting on individual stocks is still usually a longterm loser , says Taherian . Those who feel strongly about an individual stock like GameStop or a risky commodity like Bitcoin should invest no more than 10 percent of their portfolio there , she says . They should keep the other 90 percent in a 401 ( k ), a Federal Deposit Insurance Corp . -insured account or a diversified mutual fund .
And given today ’ s high valuations , Thelen says it ’ s a good time for investors to be cautious and make sure the risk level of their portfolio is appropriate . Big institutional investors are selling their stock portfolios and buying bonds , so individual investors whose stock portfolios got a big lift last year should rebalance , he says .
“ In the new millennium , we ’ ve had the tech bubble burst , the financial crisis and the coronavirus ( crisis ),” Thelen says . “ And every single time , not freaking out and instead sticking to a nice , disciplined approach , with a diversified strategy of stocks and bonds , has really done well .”
Debt ’ s a drag
McClain says businesses that were carrying less debt were more likely to survive last year ’ s economy . Debt is a lever , but it works in both directions , increasing profits when business goes well but magnifying losses when it doesn ’ t . So in 2020 , retail stores and restaurants that owned their own shop outright and weren ’ t paying leases or mortgages were more likely to survive even though they were hit hard , McClain says . In a crisis , you can cut hours and other expenses . But leases and debt service are the hardest to change , he says .
Being debt-light worked well for Josh Rubin , CEO of Post Modern Marketing , a Sacramento-based marketing , web design and site maintenance firm . He started the web design and SEO company Creative California in 2009 , then merged in 2016 with the company Post Modern Marketing , becoming owner and CEO the following year . Part of his business strategy from the beginning has been not to grow using debt . It helps that he ’ s in a service business , so 70-80 percent of the company ’ s costs are labor . He ’ s sympathetic to businesses with different cost structures that were in debt and shut down , but not having to make debt payments was one reason his company could survive a 40-percent drop in revenue in second quarter 2020 . By the end of the year , it had made it up and equaled its 2019 revenue .
Bledsoe of Three Oaks Wealth believes in businesses doing whatever they need to ride out a crisis because making it to the other side means lots of opportunities . If that means not funding your retirement account for several years so you can have enough cash to stay afloat , so be it . “ Doing whatever you can do just to stay in the game is really important ,” he says .
That ’ s been true for Bobby Reed , CEO of digital marketing and software development company Capitol Tech Solutions in Sacramento . In April and May 2020 , the company ’ s donation processing business took a huge hit . But it held on , and that part of the business came all the way back . The company has added four staff since then , Reed says . On the personal investing side , surviving means he ’ s been able to take advantage of opportunities : He just bought a commercial building and is looking at perhaps purchasing a restaurant or gym , given that owners in those sectors now might be looking to get out .
What comes next
Now comes the 2021 rebound , if all goes as predicted . “ I think we ’ re right at the beginning of a huge surge in consumer spending in 2021 ,” says Jeffrey Michael , an economist and the executive director at University of the Pacific ’ s Center for Business and Policy Research .
The number of payroll jobs in the Sacramento area fell by about 8 percent from February 2020 to September 2020 , according to a brief the center published in March 2021 . ( It defines the area as Sacramento County plus the five adjacent counties to the north .) Despite the job losses , total wage earnings for the area as a whole didn ’ t fall much
52 comstocksmag . com | June 2021