Investment Outlook, October Part II

Two weeks ago, I wrote an Investment Outlook blog post, commenting on the stock market volatility that occurred in the week prior to October 10th. That has continued, first going down, and then going up.

This month has provided lessons that investors can learn from. By learning from the past 4 weeks, you will most likely have a better lifetime of investing.

Ignore the daily and weekly fluctuations:

The more that you focus on the long-term, and less on the day-to-day movements of the stock market, the better off you will be.

A month ago, the S&P 500 was at 1,966.

Yesterday, it closed at 1,951.

Hardly any change, right? The markets appear to be calm, when viewed as 4 weeks.

However, during these 4 weeks, the market had many volatile days.

The S&P 500 closed on October 16th, a week ago, at 1,863. This was a decline of 5.2% from September 25th.

Yesterday, it closed at 1,951, an increase of 4.7% in just 5 trading days.

The roller coaster of the last 4 weeks was typical of a great amusement park ride. It climbed up hills and went quickly down them….and finally coasted right back to where it started. It was fun and exhilarating and got us back to where we boarded the ride.

Ignore the media and market forecasters:

Reading the media or listening to the forecasters on networks such as CNBC can only confuse and worry you. Could any of them have accurately predicted what occurred over the past weeks? I doubt it.

For days, all you would hear is gloom and doom (that was probably in the few weeks leading up to last Thursday). Then, what changed so dramatically that “everyone’s” view of the world, the economy and corporate profits would all of a sudden be so much better? I’m not really sure.

This is why we don’t rely on predictions. We rely on academic data and evidence for our investment philosophy and strategy.

It is better to focus on what is really important:

As we advise our clients, you should focus on things that matter and things you can control.

For your investments, this means to focus on developing a globally diversified portfolio, with the appropriate allocation of stocks, cash and fixed income for your personal and family needs. Then have the discipline to stick to this investment plan, despite what the stock market roller coaster is doing.

There are many other important things you need to focus on, besides the daily activity of the stock market. For example, we have had many important conversations with clients throughout this year to help them resolve estate planning and other generational issues.

The more you can focus on the most important things in your life, and addressing them when needed, the better you will sleep at night.


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