It is unprecedented times like these that bring
people together with a common focus and a shared desire. Protecting the lives
of our family, friends, and community has become top of mind, and our daily
efforts reflect that devotion.
While times have changed, our commitment has not
waivered. Your financial success and well-being are our top priorities. We are
diligently working to stay abreast of the changing financial landscape and keep
you on track to meet your financial goals.
When creating financial plans, we are continually
watching for bumps in the road that could prevent our clients from reaching
their goals. Financial markets and the associated volatility are not
unexpected. In fact, market volatility, as a risk, is built into every plan we
create, whether you are working toward future retirement or enjoying retirement
Having had the opportunity to help clients through
multiple bear markets, and numerous market corrections, we know that sticking
with your plan delivers the best opportunity to achieve financial success.
We will continue to use email and social media to
stay connected and keep you informed. We will resume sending postal mailings
when COVID-19 restrictions have been lifted.
I invite you to contact one of our wealth managers
to discuss your situation, get answers to your questions, and hear what Smedley
Financial is doing to help protect your financial future. We are working
remotely and are still available.
I want to thank those who have reached out to us,
concerned about our well-being. Your thoughtfulness is very much appreciated.
It is our greatest hope that you and your loved
ones stay healthy and safe.
It may turn out to be a typical election year. I expect stocks to be up in 2020, but in the single digits—much less than in 2019. Investors dislike uncertainty, and 2020 will be filled with plenty of political unknowns. Despite some extra ups and downs, election years tend to be positive for stocks. Hang in there.
A lot of Republicans could have missed out from 2009 to 2016. Similarly, Democrats would have missed the 2017-2020 markets. The rule for election volatility is that it comes sooner than most investors expect. Most summers have a bit of a slowdown. In election years, that drop usually hits in spring.
The classic October drop is typical even in election years, but don’t get caught saying, “I’ll invest when the election is over.” The market usually begins to climb a couple of weeks before the final vote.
Some rotation in the markets may develop as we learn who the candidates will be. Still, the most likely outcome is gridlock in Washington, with the Republicans staying in control of the Senate and the House controlled by Democrats. Regardless of your political opinions, gridlock is usually good for stocks because large companies plan 10+ years ahead of time and prefer a predictable business environment.
*Research by SFS. Data from the Federal Reserve Bank of St. Louis. Investing involves risk, including the potential loss of principal. The S&P 500 index is widely considered to represent the overall U.S. stock market. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.
The Dow is down 600 points! The S&P falls 7 percent! Five straight days of market decline! Sell! Sell! Sell!
During times of volatility, we see headlines like this on the news, read them on the Internet, and hear them on the radio. But before we buy the fear and sell the stock, let’s take a step back.
The most obvious fact about the stock market is this: Buy low and sell high. This gem of information is simple to understand and promises positive returns. Yet, it is during tough times that investors often forget what they know is best. Instead of buying low and selling high, investors often buy fear and sell stock.
A focus on negative market movement can cause worry, even panic. This leads investors to act irrationally and break the second rule of investing, which is: Don’t let emotion overpower logic.
Times of smooth appreciation are the exception and not the rule. In fact, 2017 was the first year in history that the S&P index closed higher every month. Volatility is the norm. Sometimes markets are up. Sometimes they’re down. Historically, the long-term trend, is up.
The average annualized return on the S&P 500 since its beginning in 1928 is approximately 10 percent. This means that those who stayed invested in diversified portfolios long-term made money.
Despite all the positive statistics I could type, watching your investment accounts decline is scary. Maybe the key to investment comfort (and success) is not a change in investments, but a change in paradigm.
My advice is this: Hire a qualified financial advisor whom you trust. Then shift your focus from market performance (something you can’t control) to your financial goals (something you can control).
When we create a plan for a client, we base it on their goals. Goal-based investing puts the emphasis on the objective, not the performance. This offers advantages.
First, it gives us a target. When we know what we’re aiming for, it becomes much easier to determine the probability of success. Changes we need to make to improve the likelihood of success also come into focus.
Second, it can produce higher returns. Focusing on the goals rather than the short-term performance can reduce emotional overreactions to market volatility. It also decreases the temptation to chase high returns, which often leads to poor performance.
Third, it brings stability and creates confidence in your financial future. Knowing you’re on track to meet your goals brings comfort regardless of which direction the market is moving.
I believe goal-based investing is a favorable approach to planning for your future. It will also consider your current financial situation, risk tolerance, and time horizon. Make sure to meet with your financial advisor regularly to review your goals and update your financial plan.
Before you buy the fear and sell the stock, please call us. We would love to talk more about goal-based investing and how it can benefit you.
*Data from public sources. Investing involves risk, including potential loss of principal. The S&P 500 index is widely considered to represent the overall U.S. stock market. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author.