Should You Get Out or Stay for the Ride?

Blog post #391

As many US market indices are at or near all time highs, and International markets are also performing strongly, many are asking the opposite question. Have US markets reached new peaks? Will they go higher? 

On Monday, the Wall Street Journal had an article titled “As Stocks Climb, Some Investors Wonder When to Get Out.” The article started by asking that as stock indices approach new record highs, it “leaves investors with a difficult choice: Lock in this year’s startling gains or hang on for the ride?”*

As an investor (and client), this may seem like a reasonable question. What should you do and how should you react when markets set new records? Will markets go higher? Should you be selling now?

This is another time we can be valuable as your financial advisor and guide, to provide you with advice and clarity during key moments and to help you avoid what could be a critical financial mistake.

We encourage and help you to be rationally optimistic. We help you to be rational, and not emotional, as you deal with uncertainty, especially in the financial markets. These principles enable us to provide you with financial and investment advice that is timeless and can be effective, if you are disciplined and patient.

We remain rationally optimistic about the long term financial markets, both in the US and overseas. History and academic data teaches us that corporate earnings will continue to grow, which will lead to higher stock markets in the future, both in the US and Internationally. 

Despite the fears and declines at the end of 2018, far more corporations have reported solid earnings for the first quarter of 2019 (so far) than declines in their revenues or earnings. Good earnings reports and guidance for continued earnings growth, along with the change to stable interest rates, have propelled stocks so far in 2019. 

Even though US markets may be at or nearing highs, and International markets are doing well, we recommend that for your long term financial future, you do not exit the stock market. This should not be a time to sell off a major portion of your stock investments.We know that you cannot successfully and accurately time the markets and predict the high and low points.

Instead, as your financial advisor, we already have a plan in place to handle market increases, which we call “rebalancing.” We have developed an Investment Policy Statement for each client, which details the intended allocation to stocks, based on your specific circumstances. 

For example, if your target allocation to stocks is 50%, as markets increase and the stock allocation increases to 55%, we would review your accounts and consider selling certain stock asset classes, to bring that allocation back towards 50%. We do not do this in an attempt to time the markets or make short-term market predictions. This is a disciplined strategy of maintaining your desired stock allocation, which has the long-term benefit of selling high and buying low. 

This gradual tweaking of your portfolio does allow for some selling as markets reach new highs, but more importantly, also allows you the opportunity to gain from further long-term increases in the markets.

Remember, the stock market has many more positive days and years than negative ones.

Remember, US and International stock markets have increased significantly over years and decades. We expect these long term trends to continue, with bumps along the way, of course. 

To reap these long term rewards, you must remain invested in stocks. You must be in the game.  You should stay for the long-term journey.

And it’s our role to help you along the way, so you can remain invested and have the ability to reap the long-term benefits that stocks can provide. 

Prior to working with our firm, you may not have had a disciplined strategy for how to handle the stock market reaching new peaks. Now
you do. 

We provide you with understandable answers and advice to these key questions. We provide you with clarity and guidance, so you can have a greater sense of financial security, comfort and success. 

If you have friends or relatives that could benefit from the advice and guidance which you have received, please let them know about our firm. We would be pleased to help them as well. You can start the conversation. 

Source

“As Stocks Climb, Some Investors Wonder When to Get Out.”The Wall Street Journal, by Ira Iosebashvili 04/22/2019  


Spring Investment Fundamentals

Blog post #388

The 2019 baseball season has just begun. 

This means that spring training has just concluded, which is the time when experienced players and rookies alike focus on the fundamentals of the game. Even though these players are the very best in their sport, they have just spent many weeks practicing baseball basics under the direction of their coaches.

The players went through repeated drills and practiced skills they have been doing ever since they were youngsters first playing baseball. Repetition. Reinforcement. Remembering the basics!

In that spirit, let’s review some investment fundamentals. 

Over the very long term, returns from stocks in the US and Internationally have far outperformed the returns of investment grade bonds, by a significant margin. 

It thus makes sense to own stocks, and not bonds, if you want your investment portfolio to grow over the long term.

The long term return of the S&P 500, representing large US based companies, is around 10% annually. We believe in a well diversified global portfolio, which includes small and large companies, as well as value companies. This type of globally diversified portfolio has future expected returns that should exceed that of the S&P 500 alone, over the long term.

To get the reward of the long term returns of stocks, you must endure the volatility that comes with owning stocks. This is a temporary risk, as diversified stock markets have climbed higher over time.

  • For example, the S&P 500, an index of 500 US-based companies, of which the companies in the index change over time, has increased over 25 times since the beginning of 1980.
  • The S&P 500 has increased from 108 on January 1, 1980 to greater than 2,800 in April, 2019.

The temporary risk is the challenge. The hard part for most investors is dealing with the volatility, like when markets drop by 20% or more. This has happened and will continue to occur, about once every 5 years since WW II. 

Helping you to deal with this volatility is one of the key benefits we can provide to you.

As stock markets cannot be consistently or accurately forecasted, the only way to benefit from the returns of the stock market is to remain invested in stocks, in accordance with the stock allocation that is determined to be appropriate for your specific situation. You can’t time stock markets. It doesn’t work. 

During the baseball season, a manager and coaches will continually remind their players of the key fundamentals, to help them succeed.

We remind you of these concepts to help you reach your financial goals. 

  • Risk and return are related.
  • The better your ability to emotionally handle the temporary drops of the stock market, the greater your chances are to reap the long term rewards that stocks can provide.
  • We will be here to guide and advise you.

Talk to us.


Handling recession and interest rate fears

Blog post #387

The economy and investment worries are always changing. 

Last year, many feared the impact of trade wars and rising interest rates to their portfolio. 

Most investors had portfolios that declined in 2018 but have seen a strong rebound so far in 2019.

Recently, there has been growing concern that due to slowing economic growth, stock portfolios may be at risk if there is a recession. If the US or global economies continues to slow, that could worsen and turn into a recession, which means at least two quarters of decline in the economy. 

Interest rates have dropped recently, so that some longer-term rates are now paying less than some short-term interest rates. For example, the three-month Treasury bill is yielding 2.439%, while the 10-year Treasury note is yielding 2.374% as of Wednesday afternoon. This is called an “inversion” of part of the bond yield curve. Some forecasters feel this type of “inversion” is an early warning sign of a future recession.

Should you be worried about this?

If you are not working with an experienced team of financial advisors, you could be worried. 

If you do not get clear and timely information, you could be worried. 

Why we don’t think you should be worried.

If you get advice and guidance from a financial advisor such as WWM, you have a long-term investment plan in place which is based on sound philosophies, so we don’t think you should be worried. We plan with you for these types of occurrences, even though we cannot predict when they will occur.

Recessions are very hard to predict. And when recessions do occur, they usually do not last that long, ranging from 6 months to less than two years. Since the Great Depression in 1929-1933, which lasted 3 years and 7 months, the longest recession was 18 months, from December 2007- June, 2009.*

And there is not necessarily a direct correlation between the timing of recessions and the impact on your investments. The stock market can decline before a recession starts and rise before a recession ends. We do not feel that what happens in the next 3-6-18 months, to the economy or your investments, should impact your ability to reach your long-term financial goals, with sound financial planning and investment advice. 

A recession does not mean that the stock market will necessarily incur the huge declines that were experienced in 2007-2009. That is always a possibility, as major declines generally occur at least once every 5 years, but again, these types of downturns cannot be reliably and accurately predicted in advance. 

Thus, fears about a potential recession should not translate into a change in your long-term investment plan of action. In a CNBC interview on Thursday, March 28th, Warren Buffett was asked about a potential recession and the impact of that on his investment strategy. He reiterated his belief, which we agree with, that you can’t predict when events like recessions will occur and it would not change his long-term desire to buy and hold stocks.

If you work with WWM, you have an investment plan that is developed for your personal situation. We view these plans as long term, to cover your financial goals and objectives for many years. You would have a globally diversified asset allocation mix (the amount of stocks and fixed income investments) that is appropriate for your goals and risk tolerance. 

If you work with WWM and you are in retirement, your investment plan is designed for decades, to support your desired standard of living. 

If you are saving for college or retirement, your plan is intended to suit you for many years or decades, during both good and bad stock market periods. 

We understand that at times you may have concerns or worries. If you are still worried after reading this, that is what we are here for. Call us and let’s discuss it. 

Working with WWM, we strive to guide you through the always changing economy and financial markets with a solid investment philosophy.  We strive to provide you with advice, re-assurance and clarity. 

We don’t want you to panic and sell because of fear. That could be detrimental to your financial future. Selling because of fears and downturns could reduce, not increase, your long-term goal of financial success. 

We want you to understand what is happening in the financial world, so that you will have the fortitude to adhere to your long-term financial plan. We feel that sticking to a long-term plan that we develop for you is much more likely to lead you to financial comfort and success. 

If you are not working with WWM and not receiving our financial advice, we encourage you to contact us. See the difference that we can make in your financial life. 

Source:

* “List of recessions in the United States“, Wikipedia


Will you even remember this occurred?

Late last year, most global stock markets dropped sharply. On Christmas Eve, the US markets had their worst Christmas Eve ever.*

Since Christmas, 2018, worldwide stock markets have risen dramatically and have recouped a large portion of the late 2018 decline.

In 66 trading days leading up to Christmas Eve, the S&P 500 declined 19.8%. However, in the 33 trading days December 26th to February 13, 2019, the S&P 500 has increased 16.6%.**

The chart below represents the above trading period, from 09/20/2018 to 02/13/2019.***
 

 While we believe that holding a broadly diversified global portfolio is in the best interest for most long term investors, I’m using the S&P 500 only for the illustrative purposes in this blog post, even though the S&P 500 consists of only US based large companies.

Global stock markets have increased significantly over the past 7 weeks despite many concerns about trade issues, the US government shutdown and worries about slowing economies in the US and globally.

This is a good reminder that even though you and others may be worried, and rightfully so, it does not mean that the stock market has to decline at that same time you have worries. The past few months are a terrific example of why we often remind you to focus on the long term, and not on the short term.

We believe it is nearly impossible to consistently and accurately time the stock market, to know when to get out and then when to get back in. You have to be right twice. To be a profitable market timer, you have to be able to do that over and over, and be correct to time the high and low points. This is not a game we advise you to play.

Though it can be difficult to handle markets when they decline quickly and sharply, we recommend that you adhere to your personal stock allocation plan, and not react to short term fluctuations and volatility.

Do you remember the decline in stocks which occurred in early 2016? Do you remember what caused this….3 short years ago? I assume that most of you do not remember that decline.

Just to refresh your memory, it was because of worries about China’s economy in January of that year. By early February, 2016, worldwide stocks began to climb again.

Three to five years from now, most investors will likely not clearly remember the late 2018 drop in stocks. It may have been worrisome for you to experience, as most major declines are scary to experience. But over time, the markets generally recover and go higher. And the memory of these declines fade.

But if your focus is on your long term future and long term financial plan, you will realize that declines like this are normal.

If you are in retirement, this is why we discuss with you the amount of fixed income savings that you have, and how long that can last you. We refer to this as your “Foundation.” For example, assume you are withdrawing around $80,000 annually from a $2 million portfolio. If you have $1 million of that portfolio in fixed income investments (50%), then you have over 12 years of annual withdrawals which are not subject to the volatility of the stock market….and that is without even including any interest on the fixed income investments. So you would really have 13 or more years of safe funds to rely on for your annual living.

If you think like this, you will hopefully be better able to tolerate the down periods in the financial markets, as you would know that you don’t actually need the stock portion of your savings for many, many years, for at least a decade in the example above. Thus, while the decline of 2018 was not pleasant for anyone, with this type of framework, you would realize that it is not directly impacting your current ability to live or your future standard of living.

It is this type of perspective and planning that we strive to develop with you, based on your age, income, expenses and savings.

We cannot predict when future major declines will occur, but we know there will be major declines in the future. On average, a major decline of around 20% or more occurs at least once every 5 years.

We want to work with you to develop a financial plan that begins to resolve your financial issues and concerns, such as how much money you may need to retire. And then we want to provide you with a plan and solution to live through your retirement years with the goal of reducing your stress that is related to financial issues.

We cannot eliminate down periods of the stock market. But we can work with you so you can strive to better handle down periods.

Let’s Talk.

*“The Stock Market just booked its ugliest Christmas Eve plunge-Ever”MarketWatch.com, by Mark Decambre, 12/24/2018

**“Stock Market Counterfactuals”awealthofcommonsense.com, by Ben Carlson, 2/08/2019

***S&P 500 ChartMorningstar.com

Investing with a Shutdown and Uncertainty

The current partial Federal government shutdown that now extends over 30 days is another example of the type of uncertainty that investors must deal with.

Investors never know what kind of news is coming next, as no one can predict the future.

Investors sometimes say they will invest more in stocks or get into the market when there is “less uncertainty.” When will that be?

Is there ever a period where there is no uncertainty? We don’t think so.

There may be times when the markets are not as volatile, where there are not wild day-to-day swings…but that does not mean that the markets are more “certain.”

When can you really be certain about the near-term direction of the stock market? We don’t think that you can truly be certain about the short-term direction of the stock market, whether its US or global stocks.

If investing in stocks is uncertain in the short term, say days, weeks, months or even a few years, then you must develop a way to handle the uncertainty and volatility that comes with investing in stocks.

We think the best way to cope with the uncertainty in stock investing is to develop what we refer to as a rationally optimistic and long-term mindset.

  • You should strive to focus on the long term and not on day to day news events.
  • You should not focus on whatever the current issues or crisis that the financial markets are dealing with and not try to analyze what the ramifications are or could be.
  • You should focus on what you can control, such as the percentage of your assets that are allocated to stocks, not on things which you cannot control.
  • You should remember that in the long term, stocks have trended higher, not lower. Stocks have had more up years than down years. This leads us to be rationally optimistic for the long-term.
  • You should talk with a financial advisor who could help you deal with the uncertainty that is inherent in investing.

While we cannot predict when the government shutdown will end or what the S & P 500 Index will be in 6 weeks, 6 months or 6 years, we can strive to help you deal with the uncertainty that comes with investing.

Talk to us. It could be beneficial to you.

The Power of Diversification

Since my junior year in high school, for nearly 40 years, I have read the Wall Street Journal almost every day it has been published.

For almost a month, I have carried an article from the Wall Street Journal around with me, because I wanted to share the story in our blog.  The headline read…. “GE….Burned Out..This is the story of how General Electric lost power.“**

When I read this article the weekend it was published, Saturday, December 15th, I knew I had to write about it.  The story of GE and its stunning demise was too important.   The article covered part or all of 8 pages. This was the longest article I can remember seeing in the Journal.

In August 2000GE was the most valuable company in the US, with a market value of nearly $600 billion. For perspective, Apple is worth $721 billion today.

While GE was worth $600 billion 19 years ago, today it is worth only $76 billion, almost one-tenth of its prior peak. The stock price has gone from a top of nearly $58 per share to a low of $6.61 and has recently climbed back to $8.76. GE has also cut their dividend dramatically, from 96 cents per share in 2017 to its current 1 penny per quarter, starting in December 2018.

The WSJ article highlights some of the errors and decisions which led to this dramatic downfall. GE was widely revered for its outstanding leadership and top executives, yet has suffered from many poor decisions and bad timing. If you are interested in management and business, I highly recommend reading this article. It is a real eye opener.

As I read the stunning details of GE’s demise and the many serious issues which they still face today, I thought about the lessons from the perspective of our financial advisory practice and some of our key investment philosophies.

We are strong advocates of broad diversification, across companies, sectors and geography. We generally do not believe in owning individual stocks as part of an investor’s core portfolio.  Declines as occurred in GE’s stock has occurred at other companies, and will happen to others in the future. This is why we advocate our philosophy of diversification.

One-time very successful companies can become stock market failures. And vice versa. There is no way to reliably predict which companies and stocks will be the most and least successful over the long term…say 5, 10, 20 years, let alone over months or a few years.

Sure, there are stocks which continue to do well and look like great investments, in hindsight. We feel that most investors would be better off owning broadly diversified funds, rather than trying to pick 10-20 stocks and concentrate their portfolio. The risk of a few stocks blowing up, such as what occurred at GE, is too great a financial risk for most people.

We must acknowledge that one of the downsides to our philosophy of broad diversification and asset class investing is that some of the funds that we recommend for our clients have owned GE in the past and a number of funds still own very small amounts of GE today.

This is the nature of asset class investing, which means that a mutual fund will own hundreds or thousands of stocks, based on the purpose or objective of that fund. The key is that rather than a stock like GE being 5 or 10 percent of your portfolio, a fund or ETF today may hold far less than 1% of GE in its portfolio. In this manner, your upside and downside of any one stock is limited.

While the WSJ’s reporting of GE’s past problems and future challenges is insightful, it should not be guidance for your investment decisions. The WSJ nor other financial media or Wall Street prognosticators did not predict the huge decline of GE in 2000. We cannot predict its future success or failure.

However, we feel that our strategy of broad diversification will minimize the impact of a single stock having a major negative impact on your financial future. We hope that brings good things to your life!

 

**Cite: “GE, Burned Out,” Wall Street Journal, print edition, page B1, December 15, 2018.(To view and have access to the article online, you must subscribe to WSJ or already have a WSJ account.)

Disclosure: GE stock is held in various funds that our clients may own. For illustrative purposes, as of 11/30/2018, GE is 0.105% of DFA US Core Equity 2 Portfolio, 0.281% of DFA US Large Company Portfolio, and 0.231% of DFA US Large Cap Value III. GE is held in additional mutual funds as well.

New Year’s Resolution for 2019 and every year

With the volatility that US and worldwide stock markets experienced during 2018, it is important to maintain your long-term asset allocation plan between stocks and fixed income.

Maintaining your asset allocation, and regularly rebalancing your portfolio, should be an annual New Year’s resolution, whether markets are going up or going down.

To maintain your asset allocation means investors should be buying stocks when markets have decreased, and incrementally selling stocks after significant market increases.

As stock markets went down in 2018, we have reviewed, and will continue to review, our clients’ portfolios to buy stocks, to rebalance their portfolios back to their planned asset allocation.

When stocks are declining, buying stocks may seem difficult. You cannot know if they will continue to fall further. Stocks may have dropped but we may still be in the midst of the decline. This is where discipline and having a long-term perspective can be beneficial.

By buying stocks to rebalance after a significant market drop, you are following the buy low, sell high strategy. This is where we as your advisor can add value to your long-term financial progress.

For example, if an investor had a $2 million portfolio that was allocated 60% to stocks and 40% to fixed income, their portfolio would be $1.2 million in stocks and $800,000 in fixed income.

If the stock portion of this hypothetical example declined 15%, then the stocks would be $1,020,000 and the fixed income allocation would still be $800,000, assuming no fixed income change.

The portfolio would now be worth a total of $1,820,000, so a 60% target allocation to stocks should be $1,092,000. To rebalance the portfolio would require selling $72,000 of fixed income and purchasing $72,000 of stocks to maintain the intended 60/40 asset allocation goal developed as part of the planning process.

If you are a client, we have designed a financial plan with you, which we call an Investment Policy Statement (IPS).

If you are not a client, do you have a financial plan? If not, maybe you should contact us and discuss why this is so important.

It’s important to remember that bear markets and down periods are a feature of the stock market. If we were to look back at every previous market decline, some investors would think it is an opportunity and other investors thought the light at the end of the tunnel was a truck coming the other way.

In each past instance, the truck coming the other way wasn’t the outcome. It’s likely that this is not the case now either. In other words, every past decline looks like an opportunity; every current decline feels like risk.

 

Resolve to rebalance as needed, or work with an advisor who does this for you.

Resolve to think long-term. Resolve to adhere to your long-term investment plan.

Reflections on 2018

Another week in the financial markets. Another week of roller coaster ups and downs.

Last Monday, Christmas Eve, the markets were down based on speculation and fears because the Treasury Secretary called 6 top US bank CEOs on Sunday to confirm there was adequate liquidity in the financial markets. However, there was no previous worry about financial liquidity. This was another day in a brutal December and fourth quarter for most US and International asset classes.

Tuesday was Christmas. Peace and quiet. Calm. No financial market trading in the US.

Wednesday the US stock market roared back with the largest percentage gain of 2018, as the S&P 500 rose almost 5%. This was the largest point gain in the history of the S&P 500 and DJIA indexes, because they are at much higher point levels than they were in the past.*** The DJIA surged more than 1,086 points, for its first ever daily gain of more than 1,000 points.****

Some thoughts as 2018 draws to a close.

  • It is difficult to explain many of the moves of the financial markets in 2018, particularly since some of them are inconsistent with each other.
    • Maybe that is the key, that investor psychology, not facts or logic, can literally change on a dime, or within a few days. For example….
      • the price of oil has dropped by 40% since early October.
      • the Federal Reserve has increased short-term interest rates during 2018, yet the 10-year Treasury Note has declined from 3.23% on November 8th to around 2.75% today.
    • Both items are positive for the economy (except for oil companies), as oil and gasoline is cheaper, as are car, mortgage and corporate borrowings.
  • There was not significant, new financial data that should have caused the huge market increase on December 26th. It was pretty clear that holiday sales were strong prior to Christmas, so a few retail sales announcements on Wednesday would not seem to be the source of the rise in 499 of 500 S&P 500 stocks.
    • Was this a change in investor psychology? Will it be short-lived or the start of a market rebound? We wish we had a crystal ball to know.
  • The huge rebound on Wednesday was a good example for our long-term belief of staying in the stock market and adhering to your financial plan. This is why we do not think an investor can successfully and repeatedly, over a long period of time, be able to predict when to get out of the market and when to get back in.
  • Stocks appear to track the growth of earnings and the expectations of future earnings, especially over the long term. In the short term, when a company announces an increase in actual or future expected earnings, the stock usually rises. If they announce lower actual or future expected earnings, the stock generally falls. This makes sense.
  • Despite economic, political, technological and other changes, corporate earnings in the US and worldwide have grown significantly over long periods of time. This is why we consider ourselves to be “rational optimists.”
    • For example, here are the year ended earnings of the S&P 500 for selected years:*****
      • 1990: $40.20
      • 2000: $72.42
      • 2001: $35.22
      • 2008: $17.84
      • 2010: $88.95
      • 2015: $92.21
      • 2017: $112.34
      • 2018: $150-160 (projected for the year 2018)
      • 2019: expected to be higher than 2018
    • Companies strive to be resilient. The ones that succeed figure out ways to adapt, change and grow their earnings.
    • It is hard to identify which ones will succeed, in advance and for decades into the future. It is also hard to predict which regions or countries, or stock markets, will outperform another, which is why we recommend investing in a globally diversified portfolio of companies.
  • There is talk of a recession. And there is talk of a slowing economy or slower growth. 
    • Let’s define the terms properly, as there are huge differences. According to businessdictionary.com, a recession is a period of general economic decline.
      • This is further defined as a contraction in GDP (economic output) for six months (two consecutive quarters) or longer. Recessions generally do not last longer than one year and are considered normal in a capitalist economy, such as the US and much of the world.
    • Why is this important? As many economists are predicting and discussing slower economic growth, few are predicting a near-term recession, or contracting economy in the next year.
    • If the US economy slows from 3% growth to 2%- 2.5% growth, that is still a growing economy, just growing at a slower rate. But that is not a recession.
  • We do not see signs of impending economic doom, such as preceded the housing bubble in 2008 and the subsequent stock market crash during that time period. While stocks in the US may have been overvalued by some measures earlier in 2018, they are much cheaper now. And stocks overseas are even cheaper on a valuation basis than broad US markets.

While 2018 has been a challenging year for most investors, we still believe in the fundamental investment principles which we have recommended and adhered to since we founded our firm over 15 years ago.

We still believe in….

  • Globally diversified portfolios of asset class mutual funds
  • Minimizing your costs
  • Investing in asset classes with greater expected returns than the S&P 500 over the long term, such as small value, International and Emerging Markets
  • Preparing an individual Investment Policy Statement, which allocates your portfolio between stocks and fixed income, based on your needs, goals, time frame and risk tolerance.

We are available to meet and talk to you when you have any questions or concerns. We know that declines in financial markets can be difficult for some to deal with.

Regardless of what happens in the world and in the financial markets, we will be here for you. We will be writing these posts weekly, to help you try to understand what is going on in the economic and financial world, so you can continue to work towards your financial goals.

 

We wish you and your family a Happy and Healthy 2019!

 

*****multpl.com, “S&P Earnings by Year“, Note that the companies in the S&P 500 change frequently, so the earnings in these figures are from different companies at different times.

 

 

 

Handling the stock market roller-coaster

Investing in stocks can be like riding a roller-coaster.

You know the roller-coaster will go up and then you know it will go down.

But you don’t know what will happen after the first hill…….until you experience the ride. You have to endure the entire ride.

The roller-coaster experience is similar to the volatility investors are now experiencing  in worldwide stock markets.

Volatility means how much something goes up or down.

In stock market terms, the more volatile a stock or asset class is, the more the increases or decreases are, as compared to other stocks.

You will note that increases are part of the definition of volatility. But for most investors, they can easily handle the “volatility” of increasing stock prices.

It is the decreases (losses), such as have occurred recently, which cause most investors concern. Most investors dislike volatility when it is associated with down stock markets.

The 2018 decline should be considered normal, on a historical basis, even if it has not been enjoyable to experience.

You want to know why these losses are occurring and when they will come to an end.

We do not have good answers to these questions. No one really does. Sometimes markets react to all kinds of news, information and investor psychology.

Today’s message is that during times like these, investors need to be disciplined.This is when investors need to remember that losses are temporary, unless you sell your stocks in a panic.

It is nearly impossible to consistently time the markets, as it is quite difficult to predict both the decline in advance and call the bottom of a downturn. Thus, remaining disciplined and adhering to your personal Investment Policy Statement will likely prove to be a solid strategy over the long term.

Investors who have an allocation to fixed income should be re-assured, as that should provide you with cash and liquidity for your near-term spending needs.

This is when you need to remember that your stocks are long term investments…..and over the long-term, which is many years, you should expect positive returns from your stock investments.

 

We don’t know how long the down portion of this roller-coaster ride will be.

 

Buckle up. We are here for you for the duration of the ride….

 

If you have questions, you want to discuss the markets or the impact on your personal situation, please contact us. This is why we are here.