There is always a market correction coming. We don’t know if it will happen next week, next month, or next year. Concern about a coming correction is not a good enough reason not to invest, because that concern will never go away.
I’m quick to admit that owning – and holding – stocks is not easy. I’ll never forget the moment a close family member (who shall remain nameless) told me in August 2011: “I never want to own stocks again. Get me out of stocks – completely.”
With this year's election just a month away, the temptation to [attempt to] time the market is as strong as ever. Our clients and friends are asking, "how will the stock market react to the election?"
It hasn’t always been this easy to invest in businesses. Writing of the 15th and 16th centuries in Europe, scholar Wilfred McClay writes: “The rapid expansion of trade was remaking the social and political map of Europe, at the same time that explorers were redrawing the physical map. In earlier eras, wealth and power had rested in the hands of those who owned land, but that was about to change. The years of expanding seaborne travel saw the rising economic and political power of a merchant class made up of those traders who had become wealthy from the risks and rewards of expanding commerce.”
This past weekend, my family and I did some post-summer/pre-fall outside work. We were digging through a bed of rocks that surrounds our house, which meant tearing through the lining underneath and burrowing 4-6 inches deep. My 13-year-old paused for a moment and asked, "Isn't there an easier way to do this?"
If you have spent any amount of time with me in one of our conference rooms, you know I am a big fan of a good story. However, while stories can be persuasive (and hopefully entertaining), statistics are much better guides for decision-making.
“Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” —Warren Buffett
Our family's Spring Break trip to Florida in 2000 took place during the infamous dot-com bubble burst. I can vividly remember my dad's reaction to the news of the bursting of the tech bubble. He had some of his portfolio (I'm not sure how much) invested in dot-com stocks via the Nasdaq Composite Index, which declined by 25% that week of our Spring Break. It ultimately took 15 years for the Nasdaq to get back to its high from the year 2000.
As we’re in the midst of the COVID-19 health and financial crisis, you likely have been watching the stock market decline and worrying, “what does this mean for me?”
On Friday afternoon, March 27, President Trump signed the $2 trillion “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) into law. You can read the full 880-page bill here.
When advising our clients to stay the course (i.e. stay fully invested), our advice is not based on wishful thinking about the markets. The advice is grounded in historical reality, and in a hope for the future.
These past few weeks have seen extreme stock market volatility, the WHO declaring a pandemic, and the U.S. implementing travel restrictions and many other measures (with more to come, assuredly) to help combat the spread of the COVID-19 coronavirus.
