Click here to learn more about our financial professionals by visiting FINRA's BrokerCheck.

Dog Days of a Bear

Dog Days of a Bear

| September 23, 2022

It is hard to watch your portfolio fall in value and not think about a change in strategy.  Who wouldn’t want to right a ship that is listing?!  But, many times our desire to help our portfolio ultimately hurts.  We have been talking about this for 9 months now – and, the market environment for investments only seems to have worsened.  What are investors to do now?  Well, let me give you 3 reasons for staying the course with your portfolio, as well as 3 reasons for making a strategy change. 

Reasons to stay the course:

  • Staying the course with a diversified, risk-allocated investment strategy through good and bad market environments has proven over and over and over again to yield favorable, long-term investment returns versus changing strategy in response to market conditions. Just Google “market timing” and you’ll find almost an infinite number of articles starting with “We ran the numbers and…” – they all have the same conclusion.  Here’s one of those articles
  • Real money and real returns play out over long periods of time due to economic progress and innovation – NOT due to politics, wars, rumors, predictions, weather-related events (or any single event), sporting outcomes, fads, or anything else that occurs in the short-term. Therefore, do not sacrifice long-term strategy based on limited, short-term perception.
  • “Stay the course” is simple. You never have to worry about not knowing the right thing to do.  Plan upfront when you are thinking clearly and free of emotion, and then trust that you put a good plan (or strategy) in place for the long-term.

Reasons to change strategy:

  • A life event causes your goals and objectives to change. Maybe a health event accelerates your need for distributions from your investments.  Maybe you are one step closer to retirement, or your employer has offered you an early retirement settlement.  Maybe, on the opposite spectrum, you have received an unexpected inheritance that minimizes the need to for distributions from your personal investment portfolio.  Life events can demand/justify a change in portfolio strategy.
  • You come to the belief that economic progress and innovation are over – that we have discovered all that we are ever going to discover. If this ever becomes the case, a strategy change will definitely be needed.  However, you are not going to like your strategy options as the only viable ones will focus less on investment and more on self-preservation (see strategies presented in “The Walking Dead”). 
  • The principles and rules of math change. If 4 + 4 all of a sudden became 7, we’d need to rethink everything.

Peter Lynch is one of the all-time greats in investing.  He managed the Fidelity Magellan fund from 1977-1990 averaging a 29% annual return during that period.  In 1994 he gave a speech to the National Press Club in Washington, D.C.  Here is a snippet of that speech (stop around 20:00 or continue for the entirety!) – listen to how eerily similar the concerns he mentions are to the current environment we are in today.  The advice hasn’t changed in almost 30 years!

I certainly am not trying to minimize the concerns that abound for the investment markets today.  There are plenty of red flags out there between Federal Reserve policy on interest rates, inflation, supply-chain issues, geo-politics, etc.  But, these things tend to blend out over time.  I’ll end with this – a post I made back in May of 2021 in which I warned clients “not to expect much in the way of investment returns over the next few years” due to valuations.  This year has certainly brought short and mid-term average investment returns back down – which is playing into my prediction for whatever it’s worth - but it hasn’t erased them completely.  For dollars invested today, I won’t be surprised if they grow significantly over the next 30 years.


*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.