Because we can learn a lot from BlackRock, Tom Petty, and Pokémon
If you’ve ever walked into a mall with two children, you know the difference between urgency and opportunity.
You hand each of them $20, and one will immediately run to the nearest toy store, candy store or Build a Bear kiosk, and spend the money faster than you handed it them. The other will wait, watch, and wander.
Sometimes he buys and sometimes he puts the money in his piggy bank for the next trip to the store. But this time, after an hour or so, he sees a comic bookstore that is going out of business. His eyes light up as he stacks boxes of Pokémon cards on the counter to buy at a steep discount.
Whether we are talking Pokémon or private equity, everyone needs to be ready for opportunities waiting around the corner. Every portfolio deserves a reserve sleeve.
With markets continuing to rollercoaster, there will be short-term opportunities over the next several months. Now is a good time to take 10% of your portfolio and put it in a reserve sleeve and wait for the right opportunities. Funds in this sleeve can be invested in futures and inexpensive ETFs, and equally split in fixed income and equity investments, so that you can be nimble so that you can react quickly when opportunities arise.
Now, putting money aside is difficult, but waiting for the right opportunity is even more difficult. Tom Petty was right; the waiting is the hardest part.
Allow me to share a big institutional example. In 2009, Barclays owned iShares, but they had to conduct their own fire sale to raise liquidity and BlackRock was able to acquire an incredible asset because the time was right.
It is all about being prepared and waiting for the right time. When we have money set aside for a rainy day, we can’t spend at the first sign of a drizzle because a hurricane is brewing.