Safety has a different meaning for each investor. For one, it means the safety of principal, as in protecting your hard earned life savings. Of course, we cannot guarantee that an investment in a stock, bond, or any other security will not decline in value, but safety can be incorporated and maximized in more than one way.
Here at Runyan Capital Advisors, we adhere to the premises identified in the field of Behavioral Economics. One idea specifically, is the Nobel Prize- winning economist Daniel Kahneman’s theory of “Loss Aversion.” Kahneman’s research demonstrates that “the aggravation that one experiences in losing a sum of money appears to be greater than the pleasure associated with gaining the [equal] amount.” That simple idea is the underpinning of the philosophy that drives our portfolio construction and helps us in maintaining our focus. Helping clients remain true to their goals of protecting their investments, and assisting them to minimize loss in periods of inevitable decline is how our management practice stays consistent with Kahneman’s Loss Aversion Theory.
Investment management firms that operate as Broker/Dealers have an additional level of required safety in the form of “SIPC” or Securities Investor Protection Corporation. The SIPC coverage acts similarly in the investment arena as FDIC or Federal Depository Insurance Corporation does for banks. It is a mandatory protection that is required by custodians to protect clients up to $500,000, which includes a $250,000 limit for cash.
We want to help you reach your investment goals and objectives without having to unnecessarily compromise that which you have worked tirelessly to earn and accumulate. Although we cannot guarantee that the market will not decline in value, we can help you limit your exposure to risks.
At first glance, you know intrinsically that cash is a safe asset by way of principal protection. However, it does involve risk. Cash can decrease in value due to inflation. Even moderate rates of inflation over time reduce the purchasing power of the dollar. We want to preserve your investment capital and protect your purchasing power both of which are critical in safeguarding the external forces influencing your dollar.