You may have had some concerns recently regarding market uncertainty and may be wondering if you should stay the course with your investment portfolio. With all the changes and disruption, you may question whether a new strategy is in order. 

In the design of your initial portfolio allocation, we planned for major disruptions or “drawdowns” in the market. In fact, your portfolio was selected based on conversations with you regarding your tolerance for down markets. It was also set up with triggers where we are actively buying more of an asset class when the price has fallen or selling it when it has had a run up in value. 

You may have heard us say that there is no such thing as a rational investor, because as human beings we often act irrationally. We think we know what is really going on, and we try to stay one step ahead of what everyone else is doing. It reminds me of the last time I was in a traffic jam, and I was sure that I could find away around the predicament by just using my GPS to find a better alternative route. However, about 2,000 other drivers had the exact same idea at the same time, which led to another traffic jam of drivers trying to avoid the primary issue. In the end, it took me even longer to get to my destination than it would have if I had stayed on the same route that I was on.

This scenario reminds me of the stock market. There seems to be a herd mentality that takes over, and it is tempting to want to pivot quickly. We often hear of amateur investors (and even some advisors) who liquidate everything and go to cash. This idea of “going to cash” sounds so tempting. The problem here is that investors who do this tend to miss out on the markets not only recovering but then going even higher.

As part of our daily operations at the Arkansas Financial Group, we have you set up with a custom portfolio allocation that we monitor every day. Odds are very good that when there is a market downturn, we are buying, not selling, and certainly not “going to cash.”

We are strict disciplinarians when it comes to following our process, because we have found that doing so results in solid portfolio returns in the long term. And as strange as it sounds, it works even better when markets are volatile. 

While there are many different strategies, we use a process called conditional rebalancing. This forces us to “buy low” when the market is moving downward and “sell high” when the market is reaching new heights. The reason it works so well and yields superior long-term results, is that it removes the judgement aspect on whether certain movements in the market are good or bad. We don’t speculate on the drama of the day or the latest headlines, we just follow the process. Then our investment committee meets quarterly as a group to review individual holdings and make assessments on long-term investment issues.

We strive to model the profile of a rational investor. A rational investor is someone who makes investment decisions based on logic, data, and analysis rather than emotions or impulses.

Here are some key characteristics of a rational investor:

1. Objective Decision-Making: They rely on facts (not speculation) and thorough analysis to make investment choices.
2. Risk Assessment: They carefully evaluate the risks and potential returns of investments.
3. Long-Term Perspective: They focus on long-term goals rather than short-term market fluctuations.
4. Diversification: They spread investments across various assets to minimize risk.
5. Consistency: They stick to a well-defined investment strategy and avoid making hasty decisions based on market volatility.

These strategies help rational investors make informed decisions and stay focused on their long-term financial goals. 

While the concept of the rational investor sounds logical, it is hard for individuals to remain rational long term, which is why we rely on our systems to keep us in check. In fact, a true rational investor is rare, if existent at all.

So, remember the adage about how to make money in the stock market: Buy low, sell high. It really is that simple, but most people do the opposite: they go to cash when the markets are falling, and they want to buy when investors are feeling euphoric. 

If you have specific concerns, please reach out to us. We will talk through your situation and work with you on specific concerns you may have. We are here to meet your needs, especially during times of uncertainty.

Kristina Bolhouse, CPA/PFS, CFP®

President/Shareholder

© 2025 Kristina Bolhouse and The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc. [“AFG]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from AFG. AFG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.arfinancial.com.