Recent Market Volatility

Oct 22, 2018Intentional Ownership

I’ve been doing this long enough to know that most of our investment clients fall into one of two categories.  I hate to admit I have favorites, but I’d be lying if I said I didn’t.  The first category is those of you who don’t follow the news or your investment portfolios.  You are my favorite because you make the best investors.  You don’t let the noise of the day or the week get in your way. Since investing is a long-term game, you win, because the only way to achieve long term returns is to stay the course through good times and bad.  If you are in this category, it probably makes sense to stop reading here.  What’s going on now and over the last month is minor on the scale of correction. Over the long-term, it will have little to no bearing on your investment performance or success.

I would like to use this time to talk to those of you who fall into category two:  those who watch the news and markets daily and weekly.  Those of us in this category know the last few weeks have not been fun.  Well, it’s time I make a confession: when you work in this business, you automatically fall into category two.  I want to make an additional confession: “I don’t like how it feels, either.”  I admit I spent time this weekend asking myself if we still have the right investment strategies and if we should consider changing anything.  Then I came to my senses and realized that I was reacting emotionally instead of rationally.  We’ve spent a lot of time building the portfolios that make sense for our clients. No matter the market environment, our plans are for 5+ years rather than the unpredictable whims of daily or monthly market movements.

With that in mind, I thought I would add a little color to what is going on.  I’ve been asked a lot recently why the market is declining.  There is a really simple answer for you: “There are more people selling stocks right now than there are people buying.”  You may not like that answer, but it’s true and it’s the only one that provides a good rationale.  You can turn on the news and they will try to tell you why they “think” the market is declining. But if you listen to enough talking heads, you discover NO ONE KNOWS.  If you want the real reason stocks are dropping right now, I encourage you to wait 6 months.  In 6 months, after everything has passed, all the pundits will tell you with high confidence why this market decline happened.  It always works this way.  Until it’s over, it’s all speculation.

What’s my advice for surviving this market volatility?  Turn your attention somewhere else.  You can’t do anything about it, and worrying about it won’t do you any good.  Trying to analyze a well-constructed long-term portfolio on a short-term basis is really a waste of energy.  Imagine you were planting an oak tree in your back yard.  Evaluating your portfolio every day is like digging up the seed every day to see how the root system is doing and to questioning why it’s not growing more.  The energy and action you use in digging up the seed actually stunts the growth process.

My advice for you (and for me) is to focus on other productive activities that will make a difference, like spending more times with your children and grandchildren on these beautiful fall evenings.  And when the news has you feeling anxious, my first piece of advice is to turn it off.  If that doesn’t work, feel free to give us a call.  We are watching it as well.  We won’t change anything about how you are invested, and we don’t know any more than the talking heads.  However, if having a conversation makes you feel better and stops you from reacting emotionally, we’re here to help.