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Be the Patient Investor

Be the Patient Investor

| June 11, 2020

I was talking to a group of buddies last night – while properly socially distancing outside around a friend’s backyard pool.  Somebody made the obvious, yet simply profound, statement, “This year stinks!”  He used a little more colorful language than that, but you get the point.  I’m sure that some of you have said the same while talking to friends and family.  Nobody could have foreseen a global economic shutdown due to a pandemic coupled with soaring racial tensions, protests, and even riots that have thrown our great nation into an ungracious turmoil.  And, we still have a Presidential election to endure in the coming months.  It would be nice if we could wake up tomorrow in the year 2021.  But, as we cannot, we will simply have to persevere through the second half of 2020.

In past communications I have warned against investor complacency – primarily in thinking that we are beyond market turmoil and have returned once again to steady market growth.  You can read one such warning in my post of April 9th, 2020.  Today investors are being tested in their ability to remain vigilant.  It is hard to experience relief in seeing your portfolio regain losses after a significant downturn only to give up some of that rebound on a volatile day like today.  Remember, investment growth is not linear – especially during periods of economic uncertainty.  Paula Abdul explained it best in her early 90’s hit music video “Opposites Attract”.  But, time and time again has proven that the patient investor benefits more in the long-run than the reactive investor.  This chart illustrates the point.  During the 2008-2009 Great Recession and market crash a hypothetical investor who invested $100,000 in the S&P 500 right before the market collapsed but who remained invested through 2019 grew their investment 1.5 times greater than the investor who jumped out of the market at the bottom and back in within 12 months.  The investor who panicked and decided to put all of their portfolio in cash at the bottom of the market and never reinvested was the only one that had a negative return. You can also see in the chart that the period between the bottom of the market in 2009 to 2019 was full of smaller corrections and periods of heightened volatility.  Again, investors have to expect market days like today and market periods like this year, while at the same time maintaining that the long-term future will look different due to economic progress.  I encourage you once again to steel your expectations, be the patient investor, and trust that sticking to your long-term investment strategy as part of your financial plan will pay off in the end.     

Of course, many people are not even focused on their investment portfolios or financial plans right now due to societal anxieties of more import.  I have the privilege of speaking with clients, referrals and prospects every day that span the gamut of political, socio-economic, geographic, and racial divides.  And, while it may be a small sample-size in the context of the 328.2-million-person U.S. population, I am encouraged by the similarities I see in people.  There are exceptions to every rule, but overall the people I run across in my work all desire the same things – financial stability, health, success for their children in education and beyond, safety, and the freedom to follow their convictions in the pursuit of happiness.  And while people may disagree on the best practices and policies that will enable them to achieve these desires, the core desires themselves give everyone common ground.  My hope – and maybe it is naïve – is that the more we can focus on that which makes us the same, the more we can find unity in the midst of disagreement.  I truly believe there is an unnoticed majority in our country that in small, imperfect ways are loving their neighbors, seeking the good of others, and fulfilling the American dream in peace and contentment.  I hope I am one of them, and in my observation, you most likely are.  We will see you in 2021 but will be here in 2020 if and when you need us. 

*Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements and projections. There are no guarantees that these results will be achieved. It is our goal to help investors by identifying changing market conditions, however, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the economy or the stock market. The Standard & Poor’s 500 (S&P 500) is a stock market index containing the stocks of 500 American corporations with large market capitalization that are considered to be widely held. The S&P 500 is unmanaged and cannot be invested in directly.