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Sandcastles and a Day at the Beach

Recently, Katie and I were playing with Francis in and out of the pool. While playing out of the pool, Francis was building little forts out of the sand in his sandbox for his cars. Once one fort was built, he would build another before running to the pool and getting a bucket of water to pour over the sand. Seeing this reminded me of an analogy my father has shared for years and many of you may have already heard. Even if you have heard it, you can at least ‘escape’ to the beach for a bit.

Imagine you are sitting on the beach in San Diego. It is a beautiful 72 degrees, not a cloud in the sky and you feel a gentle breeze on your face. All in all, not a bad day. While sitting you notice a group of children building a sandcastle. Now this is not any ordinary sandcastle, rather it has multiple towers, battlements, walls for protection and even a moat. These children worked for hours and have built an amazing sandcastle.

Originally, the sandcastle was built approximately 20 feet from the breaking waves, however as time progressed, inch by inch, the waves started crashing closer to the castle. Before you know it, the waves are getting bigger and bigger and starting to affect the sandcastle. The moat is not as well defined, and the walls of the castle are starting to crumble in some places. By now, if there was a real king or queen within the walls, they would probably be looking for higher ground.

As humans, we learn by doing. These children learned about the effect of waves on sand, by seeing their sandcastle slowly being invaded by the waves of water and watching parts of it start to get washed away. However, due to how they built the sandcastle, it was not one single wave that could destroy it, rather it was a series of waves. A series of waves, which again, if real, would have provided the inhabitants of the castle time to change course or adjust.

So, what do sandcastles and waves have to do with you? We are here to try and protect your sandcastle (your financial world) from a series of waves which can negatively affect you or your family. Sometimes, a minor adjustment, such as getting an umbrella insurance policy, can help protect against the catastrophic wave, while reviewing beneficiaries could ensure your sandcastle goes to the people you love and care about.

Just as the kids on the beach have no idea if a big wave is going to come, no one knows when an event could occur which could drastically affect your life. It is because of this unknown we must spend the time having discussions, tweaking the design of your ‘sandcastle’ and being nimble when life throws us curve balls.

The end of summer has historically been one of slightly more volatility as people go on vacation. While vacation travel has certainly decreased, we have started to see slight volatility within the equity markets. Earnings season has arrived, and it is shaping up to be one of the largest year-over-year decreases in history. Basically, an earnings season to forget. There is renewed hostility between the US and China. Congress is negotiating a new round of stimulus and will most likely wait until next week or the 11th hour to announce anything. This period has resulted even more unknown which has caused some selling pressure. However, even with the selling pressure, looking at technical indicators, the S&P 500 has numerous levels of support below its current level.

Have a good weekend and look forward to the day when you are sitting on the beach again.

Stay safe and healthy.


Chris Zeches, CFP®
Managing Partner