I saw a headline the other day on Bloomberg TV. It said, “Growing list of investor concerns.”
Seriously? Of course there is a growing list of concerns! The market just sold off.
People get concerned when they lose money. That’s natural and understandable.
Needs create concern. When you need the money and it loses value, you become concerned.
However, now is not the time for investors to be identifying needs and expressing concerns. The time to do that is in the bull market when things are good. It’s hard to do in the throes of euphoric market excitement. Remember those days? Watching balances increase just about every day from November 2017 to January 2018 and from April to October of this year?
In a recent casual get together with some financial industry colleagues, we all got to talking about how we saw investors reacting to the selloff. We agreed that many investors saw their balances hit all-time highs at the end of January this year only to see them erode back down to pre-November 2017 levels by early February. We also agreed that most were fine, but some were nervous, angry, disappointed or feeling like there was something that should have been done – especially when nothing (purposely) was done.
Fast forward to the beginning of October when all the losses were made up and the markets were hitting new all-time highs. Many of those who expressed concern in February were silent.
…Until last week.
We have written before about running a “fire drill,” and I’m not sure I’ve ever written a blog where I don’t mention the importance of having a plan and forecasting cash needs out no less than 12 months.
Selloffs like this statistically happen twice a year. The market does a good job of reminding us…about twice a year.
This bottoming could be a process. On the other hand, the 4th quarter is usually pretty good historically. I think it’s more constructive to focus on the steepening of the yield curve, great GDP, 7 million job openings and 20% profit growth. We remain at MONCON 5, the lowest level of recession concern.
Stay calm during periods like this. Avoid emotional investment decisions. Remember that volatility can go both directions…it’s just another period of time in the market! If you got bent out of shape over the past few weeks, you need to consider adjusting your asset allocation when the market finally recovers.
One thing investors have a hard time learning is that doing nothing is, more often than not, a value-add. People want to be “right” (and as an extension want us to be “right”) at times like this. That often equates to wanting to take action (or wanting us to take some sort of action). Action is often damaging to returns.
Investing isn’t so much about being right as it is about being SUCCESSFUL.
Keep looking forward,
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