This too shall pass...
It is my intention to personally reach out to every single one of you and to re-assure you that everything is going to be OK. In the interest of time, I am sharing my thoughts below and my staff and I are here to answer ANY questions you might have. Please reach out!
In today's day and age there is an instantaneous spread of information. The news is positive and negative, accurate and not so accurate, and lately, Breaking news after Breaking news, and then more Breaking news.….it is hard not to panic. So here are a few things I want to share with you.
First and foremost, I hope that all of you stay healthy and safe. Our health very much depends on each other and even more so for those with compromised immune systems. Above everything else it is very important to not get caught up in the headlines and hysteria. Please TAKE CARE of each other.
Now my thoughts about the market. In addition to the health concerns, this coronavirus situation is impacting people’s lives personally and financially too. I have been fortunate to enjoy my career in financial planning for over 25 years and many of you have been working with me for that long. I would be lying if I said that the latest market decline is not a big deal or that it doesn’t feel uncomfortable, the same as multiple ones BEFORE… it does every single time! But here is what I learned from these experiences and it is still the same today:
Panic is not a plan.
We spent a considerable amount of time putting together your financial plan. We talked about long-term goals, short-terms goals, the amount of risk you can stomach, potential market ups and downs and long-term performance etc. If you are feeling nervous, like you want to go to cash or revisit your allocation, I’d like you to consider the following:
Have your goals or values changed? We designed your investment portfolio and financial plan around your specifically stated goals and values.
Has the amount of money you need monthly, or time horizon for needing your money, or beneficiary needs, or anything else material changed?
If we sell now (i.e., “go to cash until things settle down”), when will you want to re-enter the market and what does the economy and stock market look like at that time?
It’s ok if you feel nervous.
The last several trading days have been extremely volatile, and we’ve watched acute declines in equities, treasury yields and oil. This creates an enormous amount of uncertainty, and it’s natural to feel a bit unsettled.
I’m human too.
I have money invested with long term goals in mind, and money I need in the short term. Even though I know I won’t be using most of my investments for several years it doesn’t feel good when I watch my balances fluctuate in this manner, even though I know objectively I need to stick with my plan. I understand what it’s like to know something objectively but have emotions that don’t align.
You may feel like you need to DO SOMETHING.
When we feel like things are out of our control, there is a natural inclination to feel like you need to act- sell something or buy something! People ask me, “What are we doing about this?”. Please let me remind you that sticking with your target allocation, i.e., doing nothing, is actually doing SOMETHING.
Here’s the thing- I know you objectively know this! Historically, the best days in the stock market follow some of the worst. You may be thinking, “I just don’t want to ride this down anymore”, and I understand that feeling. I don’t know anyone who rode out the bear market of 2007-2009 and said, “I really wish I had sold out and not recovered”. This matter because even if you sell now and do avoid a further decline, you will have locked in a loss and will have to figure out when and how to re-enter. I would argue that THAT is the bigger challenge.
Two more thoughts for tonight.
Our chief investment strategist Brad McMillan published this timely article today. Please take a look at your convenience.
On October 16, 2008 in an editorial for The New York Times, Warren Buffett, considered by many to be one of the greatest investors of his generation, repeated one of his favorite maxims: Be fearful when others are greedy and greedy when others are fearful. Markets would subsequently see considerable losses before reaching their lows almost five months later on March 6, 2009. Buffett didn’t call the bottom, and there were still gains to be made for highly tactical investors who were betting against stocks. But looking back on Buffett’s remarks today, the advice was quite prescient.
I want to help you stick with the plan that was designed to help you meet your long term needs and avoid making decisions that are short-term in outlook that will put those plans in jeopardy. This is why we maintain low risk assets and cash for near-term needs. If any of those needs have truly changed, please be in touch.
We are here to help and support you through these challenging times.