It’s Dr. Martin Luther King Jr.’s birthday, and I thought it would be a good time for you to hear from me. Dr. King always preached calm in turbulent times, and I would like to echo that sentiment during these turbulent financial times.
Let me first say that we haven’t had our phones “ringing off the wall” with panicked clients. I have said it many times before, and I must say it again, we have been blessed with most intelligent and experienced clients that we could ever hope for as advisors. You get it.
However, every now and again, it’s good to review a few points about how we invest your money and, in particular, how to think of this really challenging start to the year. SPOILER ALERT: I am not going to tell you what I think the market is going to do from here, because I don’t know. No one else does, either, no matter what they say.
What I do want to remind all of us is this:
– No one knows where the market goes from here. According to every study I have read on the subject, financial commentators, pundits and advisors are wrong roughly 70% of the time when they attempt to predict markets and their direction. By the way, no one at our firm knows, either. That is precisely why we have thoughtfully spread your money into many different investment buckets.
– Stocks are sharply down, but we have not invested all of your money in stocks – far from it. So, when the people on TV (the ones with their hair on fire) tell you the market tumbled “X percent”, please remember that your account was negatively impacted, but most likely did not tumble nearly as much.
– I feel your pain. I personally invest in the same investments we have recommended and manage for you. They are excellent choices that tend to outperform their peers over the long run.
– Markets frequently experience temporary losses. In fact, for the past 30+ years, the S&P 500 has suffered, on average, at least one major intra-year downturn per year and that downturn has averaged negative fourteen percent when it happened. Yet, over that period, investors who kept their heads have experienced fantastic multiples on their investment.
– We invest your money in many different asset classes that do not “walk in lock step” with one another. This diversified approach works whether you want it to or not, meaning that your account has components that are almost always doing well and other components that are simultaneously doing not-so-well. This is the nature of diversification. Most of our portfolios have some component of stock and that component has temporarily put our portfolios into negative territory. This is normal. This is expected.
I will admit that every investor, myself included, have wondered in the middle of a downturn if it really is different this time. I assure you, it is not different this time! It really never is because the laws of the business cycle and those of supply and demand have not been repealed.
So, like me, take a deep breath. Focus. Remember that our strategy is rock solid, sensible and has made our clients millions of dollars over the years with scores and scores of these transitory market setbacks along the way, just like the one we are experiencing now. Trust in that strategy as we do and we will make it through this recent setback just fine together.
Thank you for your continued trust and confidence.
Mike Booker, CFP®, ChFC®, CFS