By Haddon Libby
After everything that has transpired in the stock and bond markets over the last few months, let’s pause to reflect on the fundamental investment principles that guide us to protect and grow wealth effectively.
A study by RBC Wealth Management analyzed four hypothetical investors over the past twenty years. Each investor made $3,000 annual contributions over twenty years ($60,000 total) to their investment accounts.
Investor #1, dubbed Kreskin, strategically added $3,000 each year at the stock market’s lowest price point.
Investor #2, named Jack B (founder of Vanguard Investments), consistently invests $250 every month over twenty years.
Investor #3, called ‘Wrongway Corrigan’ after the Depression-era aviator who intentionally flew from Brooklyn to Europe instead of his planned Long Beach, California destination, does the opposite of Kreskin and invests at the market’s highest value annually.
Investor #4, named Johnny Cash, places money in a secure, interest-earning cash investment, entirely avoiding the stock market.
Unsurprisingly, Kreskin performed best with $149,000, followed by Bogle at $137,000, Wrongway at $129,000, and Cash last at $72,000.
This illustrates that even an investor with poor timing outperforms one who remains in cash. Bogle’s disciplined approach is likely the easiest to follow, as you invest the same amount each month regardless of market conditions. This consistency fosters some of the best growth rates over time. Even Wrongway fares reasonably well by staying invested in the market.
Nobel laureate Harry Markowitz, creator of Modern Portfolio Theory in 1952, famously said, “Diversification is the only free lunch in investing.” Markowitz’s adage is straightforward: by holding a varied mix of assets that do not move in lockstep, potential losses in one area are mitigated by gains in another. This principle has faced scrutiny recently due to the strong outperformance of technology and mega-cap stocks like Apple, Amazon, and Microsoft.
Looking at the market’s performance in 2025 through April 10th, tech stocks and cyclicals declined by more than 17%, while healthcare, utilities, and consumer staple stocks held steady. Meanwhile, the 10-year Treasury yielded 4.48%, offering tax-effective yields as high as 4.92%. A typical 5-year corporate bond delivered roughly the same yield as Treasuries.
One key takeaway is that a balanced mix of assets is crucial for managing portfolio risk. Fixed income provides a stable foundation, offsetting the volatility of equities. Within equities, tech has led performance over the past decade, yet maintaining higher dividend stocks—such as those in healthcare, utilities, staples, and financials—is vital for risk management.
This brings us to the most critical consideration: what level of risk aligns with your personal comfort zone?
If your risk level exceeds your comfort zone, you may be tempted to sell when prices are low and buy after a rally has already occurred.
The last two months highlight some of the extreme volatility that can shake investor confidence. Markets peaked on February 18th before a three-week decline of 10%. From March 13th through the 25th, markets rallied nearly 5% before a sharp drop from April 2nd through April 9th, when President Trump announced a 90-day pause on most tariffs. During that week, markets fell by nearly 12%, contributing to a 19% decline in valuations from mid-February’s all-time highs. On April 9th alone, markets surged by roughly 7% before relinquishing some gains on the 10th.
History indicates that markets typically rally by 29% from cyclical lows. The question remains whether April 8th marked the low. Since predicting the future is impossible, we must evaluate whether we are comfortable with our current asset allocation mix.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management, a locally-based Fiduciary RIA. For more information, please visit www.WinslowDrake.com.
