The recent downturn in the financial markets, has many investors concerned. While we could point to COVID-19 as the culprit for the previous bear market, the current fear, uncertainty and volatility that has us pointed towards another bear (which is defined as a 20% drop from a previous high), seems to be as a result of many negative factors:
- The Federal Reserve’s handling of interest rate hikes in an attempt to control out-of-control inflation.
- International atrocities like the Ukrainian invasion.
- Weaker than expected earnings by some companies.
- A quick turn from energy independence to dependence.
- And most recently, baby formula shortages.
It does not appear these market factors will resolve themselves anytime soon.
So while we monitor headlines and market movements, please know that we remain resolved and committed to maintaining our disciplined and diversified approach to investing for the long-term. This approach is nothing new.
History has shown, dare I say proven per my experience, that when the urge to change your portfolio is the strongest, the benefits of the changing are the weakest, and would result in selling low and locking in losses. In fact, missing out on just a few of the best days in the market, which often comes on the heels of some of the worst days in the market, can have a profound impact on your long-term performance. Consider this chart:
Now let me say it another way and borrow from pop culture. Fans of Seinfeld will surely remember the episode entitled, “The Opposite.” In a nutshell, George Constanza (played by Jason Alexander) realizes one day that every decision he has ever made, has been wrong! So he vows in that moment, from now on, to go the opposite of his natural instincts. As a result, within minutes of this revelation and acting on it, he gets a date with an attractive woman! Here is a 2-minute clip if you’d like to watch, because right about now, we need something to laugh about: Seinfeld: The Opposite (Clip) | TBS
Now back to reality. If you feel like bailing on your portfolio, maybe one that we placed you into, or even your 401k or some other account, consider the nugget of truth contained in the Opposite episode and instead, be resolved to maintain your plans and your portfolio.
Said another way, one of our Henry Wealth Management mantras is this: “You don’t always have to always like your portfolio, you just have to live with it.” And recall our trademarked one: “The first thing we earn is trust.”
Thank you for your business and trust. We are here to talk and/or meet. In the meantime, go opposite of your emotions.