A First Foundation Blog

Seeking Balance: Playing Offense and Defense

3 minute read

Monday through Friday. 6:30 AM Pacific Time. A bell rings.

Domestic equity markets open and a new trading day for professional and retail investors begins. For those with exposure to global portfolios, their portfolio rarely sleeps as Asian equities begin their trading session overnight and then are followed by European markets. Regardless of location or asset class, each professional and retail investor begins their day with the same two risks: 1) the risk of losing money and 2) the risk of missed opportunities to make money. The first risk stares at us right in the face when it occurs, typically with a negative sign on our statement or perhaps highlighted in red text on our computer screen (or iPhone). The latter is a little harder to gauge. Did I pick the wrong asset class (i.e. cash vs. bonds vs. stocks)? Did the investment solution (mutual fund, separately managed account, or ETF) underperform their benchmark? Did I miss out on a single stock opportunity which has now shot to the moon?

Fear of missing out, also known as FOMO, is real. Our regret and angst is magnified even more due to the minute-to-minute daily dose of financial media which grades and highlights each decision real-time.

This is why it is important that investors must seek a balance between trying to make money and avoid losing money … at the same time.

Easier said than done, as each investor has their own unique tolerance and definition of success. For example, most investors look to the S&P 500 as the broad benchmark for large cap U.S. equities. Others look to the tech heavy NASDAQ Composite while some still look at the Dow Jones Industrial Average, a more value tilted index.

As of market close July 22, the year-to-date returns have been dramatically different.

Domestic Large Cap Indexes:
S&P 500:  +1.40%
NASDAQ: +19.32%
DJIA: -5.37%

Prior to the Great Financial Crisis the penalty for sitting in cash was fairly low, as cash was yielding around 5%. Defensive assets have morphed greatly since the Great Financial Crisis due to interest rates being anchored at zero for most of the period following it. Cash once again yields close to zero. Here’s a look at how the 10-year U.S. treasury has changed over the last twenty years.

10-year U.S. Treasury yield:
January 2000: 6.68%
January 2010: 3.63%
January 2020: 1.51%
July 22, 2020: 0.60%

Today’s low interest rate environment equates to a higher risk/lower reward world. In order to seek higher returns, investors must be willing to accept one or more of the following: more volatility, more interest rate risk, more credit risk, less liquidity, or all of the above. High yield fixed income, the riskiest part of the bond market, currently yields about 5%, or about what cash used to yield. Playing defense has become much harder, but there are still defensive assets such as investment grade bonds, gold, and alternative strategies which are less correlated to broad equity markets.

Part of our job as your wealth advisor is to help you define your risk tolerance and distill it into a customized long-term investment strategy to better achieve your long-term goals, constantly thinking and adjusting playing offense and defense … at the same time.

Again, we are here and ready to do our best to answer any questions you may have or to just simply talk things through at times when you feel it may be helpful. We can navigate this together.


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 First Foundation Advisors), or any non-investment related content, made reference to directly or indirectly in this blog 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 blog serves as the receipt of, or as a substitute for, personalized investment advice from First Foundation Advisors. Please remember that if you are a First Foundation client, it remains your responsibility to advise First Foundation, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. First Foundation Advisors is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the First Foundation Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request, or at  Please Note: First Foundation Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to First Foundation Advisors’ web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Andrew Chan, CAIA, Co-Chief Investment Officer
About the Author
Andrew Chan, CAIA, Co-Chief Investment Officer
Mr. Chan co-leads the strategic investment committee and is responsible for overseeing First Foundation Advisor’s investment solutions platform which includes conducting investment manager research for both traditional and alternative investments as well as asset allocation guidance for portfolio construction. As a member of the investment committee, he provides market commentary and investment insights to clients. Additionally, Mr. Chan serves as a senior executive on the business strategy committee providing guidance on firm wide initiatives. With over 15 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous national committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan has previously served as an exam working group member and as an exam grader for CAIA. A member of the CAIA SoCal Executive Board since 2015, Mr. Chan has served as executive chapter head since 2017. Read more