It is not completely outlandish to feel a sense of uneasiness about investing in our current market climate. Unprecedented growth and increased volatility leave us wondering when the next market “crash” will occur. Political and economic influences are on the forefront, as investors scratch their heads in concern with everything from trade wars and maintaining economic allies, to inflation.
Vanguard Founder, Jon Bogle said, “The Stock Market is a giant distraction to the business of investing.” He goes on to say, “The expectations market is about speculation. The real market is about investing. The only logical conclusion: the stock market is a giant distraction that causes investors to focus on transitory and volatile investment expectations rather than on what is really important – the gradual accumulation of the returns earned by corporate business.”
Put simply, Bogle is saying that we know the market will fluctuate. We know interest rates will fluctuate. We know that news stories and the media try to paint a picture to get us to read their articles. But, implementing an evidence-based investing strategy that focuses on the long-term will help mitigate some of these short-term concerns. Take a look at the following chart:
While we could indulge in incredible analyses of the latest economic news – China, trade, The Fed, President Trump’s decisions and so on – we won’t. We don’t want to distract you from the real task at hand.
As an investor, your job is to remember that these are the very kinds of intrinsic events that our evidence-based strategy is meant to help you overlook, so you can achieve the kind of investment success that Bogle and countless others have described.
If the gloomy headlines worry you to the point that you are wondering whether you need to “do something,” we hope that the “something” will be to call us right away, so we can discuss what actions – or inactions – are in your best interest. Making too many changes in a portfolio can many times have an adverse effect. Academic studies have found that market timing costs about 1.56% in foregone returns per year!
Because we owe our clients a fiduciary duty to always serve their highest financial interests, it is both our desire and our legal obligation to advise you accordingly. It is a responsibility that we take very seriously. Remember the following:
Market drops are an expected, unavoidable part of investing.
Our advice is simple and straightforward: Stay calm and stay the course.
Remember why you are investing. If you’re saving for a long-term goal, such as a retirement, your allocation already factors in a short-term market drop.
If you’re merely curious about the current market climate, we’d be happy to talk with you and answer any questions you may have. Even though we encourage you to not focus too heavily on the market’s daily activities, as financial professionals, we are aware of the details in the news and are always discussing the implications of such current events on our client’s portfolios.
“The stock market is a device for transferring money from the impatient to the patient.”
– Warren Buffet, The Oracle of Omaha
Our job is to remind our clients to remember this is what you and we have prepared for together. Come what may, we’re here to help you stay on your way. Contact us at info@arcadiawm.com.
i. Bogle, John, 2007, “The Little Book of Common Sense Investing.”
ii. https://research.stlouisfed.org/publications/economic-synopses/2014/07/18/the-cost-of-chasing-returns/
