Fixed Income: The Perfect Antidote To Economic Anxiety

To say that we are living in uncertain economic times would be an understatement.

According to multiple surveys, inflation is on the top of everyone’s minds, with Americans listing it as their #1 concern. It’s no wonder as inflation is at its highest rate in four decades. Along with inflation, there’s concern about an impending recession. Couple those worries with the war in Ukraine and high gas prices, and you have a recipe for investor anxiety.

Just look at the year-to-date Dow and Bitcoin charts for examples of investor anxiety and volatility in the markets. Year-to-date, the Dow is down more than 16%, while Bitcoin has shed more than 57% of its value.

All this anxiety is a recipe for bad investment decision-making. Scientific data back up that investors are making questionable financial decisions amid uncertainty and anxiety. A recent study by University of Pittsburgh researchers found that anxiety blocks neurons in the part of the brain responsible for sound decision-making.

To insulate their portfolios from anxiety and poor decision-making, smart investors allocate to assets that eliminate emotions from their investment decisions. By allocating to certain assets carrying particular attributes, smart investors can take the direction of their investments out of the hands of the herd – and even their own personal emotions – to insulate their portfolios from bad decision-making.

How do smart investors insulate their portfolios from uncertainty?

  • They avoid volatility. Smart investors eliminate the uncertainty and anxiety that plagues broader markets by allocating to private markets and away from public markets susceptible to herd-induced volatility. Private investments not traded on public forums are insulated from irrational market factors such as social media, internet hype, and cable and web pundits and talking heads.
  • They value illiquidity. Locking up investments for a specified term/time period saves investors from themselves. Without the ability to liquidate an asset until the end of the term of a private investment, investors are prevented from making ill-advised decisions brought on by anxiety. Illiquidity acts as a financial handcuff to prevent investors from making rash decisions.
  • They invest in demand and certainty. Smart investors seek demand – assets with a track record of generating consistent and reliable returns. Consistency is ideal for mitigating uncertainty and volatility.
  • They seek out income for capital preservation. In inflationary times, as buying power and 9-5 income is diminished, supplemental income from passive sources is ideal for mitigating rising prices’ negative effects. While unprotected investors watch their capital sitting in 401(k)’s, IRAs, treasuries, bank accounts, CDs, money markets, and annuities diminish, investors with cash-flowing investments generating returns that keep pace or exceed inflation can preserve their capital.

Why Fixed Income?

The ultra-wealthy have long gravitated to fixed income assets for certainty and stability in uncertain times. The value of fixed income assets is they generate stable and defined income flows, providing certain nominal cash flow.

Fixed income also shows a low correlation with other asset classes. In other words, a stock market crash or crash of any other asset will not likely affect a fixed income asset. This serves as an ideal hedge against financial disasters.

To summarize, the benefits of fixed income assets are:

  • Certain, stable cash flow.
  • Low correlation between other assets and the broader markets.
  • Hedge against financial disruption.

Why are investors willing to give up potential upside with fixed income assets?

For certainty and predictability. Smart investors leave as little to chance as possible when investing, and with fixed income assets, they have one less concern to worry about – the rate of return on their investment.

The ultra-wealthy don’t hope to achieve financial freedom. They plan for it. They invest as if their lives depend on it because, in a way, their lives – at least the best lives they wish to live – do depend on their investment choices. Investing for financial freedom requires careful planning and sound financial decisions and projections. They value certainty – a certainty not found in public assets that are far too often driven by emotions and factors that have nothing to do with data, math, or underlying economic fundamentals.

The ultra-wealthy value data and math when making investments for predictability, allowing for financial modeling and planning. Fixed income assets are perfect for investors who crunch numbers and value data, math, and metrics. A fixed return eliminates all the guesswork in calculating the ROI of an investment.

Fixed income assets are the ideal antidote to economic uncertainty and anxiety. Additionally, private investments in fixed income assets shield investors from the volatility and uncertainty of the broader markets while generating recession-resistant income that also serves as a valuable hedge against inflation.

Finally, while fixed income assets are the perfect antidote to economic anxiety, there is another type of antidote ideal for relieving emotional anxiety and uncertainty. That antidote is to serve others.

​​Multiple studies have found that serving others provides mental health benefits, including reduced anxiety and depression. That is part of the reason we started our Doc2Doc Lending Income Fund. We wanted to provide investors with certainty and stability while providing a needed service to our fellow doctors – short-term loans to meet their professional and personal needs when in a bind.

With investors seeking more and more to weave social causes into their investments, we have also taken up the mantle of impact investing. That’s why we have decided to serve our peers by providing fellow physicians with the financial help they may not be able to find elsewhere in a timely manner.

Contact us today for investors seeking to help others and earn a fixed income to combat economic uncertainty to explore how you can get involved.