If you liked Bitcoin at $19,000, you must love it at $11,000. Bitcoin peaked at a price of $19,198 on December 16, 2017. In the 40 days since then, its price has plummeted more than 40%.

When talking about investing or portfolio construction, one of the core philosophies you should learn about is asset allocation. What is asset allocation? It is an investment strategy that aims to balance the risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. The three main asset classes – equities (stocks), fixed-income (bonds), and cash – have different levels of risk and return, so each will behave differently over time.

Owning stocks is not always a pleasant experience. The Great Recession of 2007-2009 ultimately cut US stocks by more than 54%. The Great Depression brought nearly a 90% reduction in US stocks. Those drawdowns are Exhibit A of why our clients in distribution mode (i.e. Retirement) never own 100% stocks. In fact, they typically own anywhere from 45% - 65% in their portfolio in stocks, with the reminder invested in a diversified portfolio of bonds and some cash. That way, the nasty shocks that inevitably hit equity markets will be cushioned by the bond and cash exposures.

Every spring, the Gallup organization surveys Americans for an answer to this question: Which of the following do you think is the best long-term investment: bonds real estate savings account/CDs stocks/mutual funds gold

The most common question we have heard from clients in 2017 is some variation on this one: "Is the stock market due for a drop?" For some clients, their concerns relate to uncertainty about policy decisions of the Trump Administration. For others, fears stem from endless media reports about the stock market making new all-time highs. For others, it's a well-placed understanding that bull markets don't go on forever (true).

The average U.S. household is in the best condition we have seen in nearly three decades, according to the most recent research released by the Federal Reserve. The scars of the Financial Crisis have continued to serve as a positive catalyst for deleveraging in America -- a trend we cheer with the utmost vigor.

We're talking about Warren Buffett today. He's the most legendary (and arguably successful) stock market investor in US history. Buffett made headlines recently by saying he has spent about $20 billion on buying stocks. Some of those purchases took place before the presidential election and some took place after the election. With a current net worth around $79 billion, a $20 billion addition to stocks for Buffett is a very significant move. He just took 25% of his total net worth and added it to various stock investments.

Via Credit Suisse: "At the beginning of 1900, virtually no one had driven a car, made a phone call, used an electric light, heard recorded music, or seen a movie; no one had flown in an aircraft, listened to the radio, watched TV, used a computer, sent an e-mail, or used a smartphone. There were no x-rays, body scans, DNA tests, or transplants, and no one had taken an antibiotic; as a result, many would die young."

Many clients worry about stock market corrections. We have even seen clients move their 401(k) plan assets 100% into cash in one year, only to move it back to 100% stocks the next year. The next time you are worrying about a 15% or 25% correction in the US stock market, try thinking about the other side of the coin. What if you miss out on the next 15% or 25% increase in the market?

The longer you hold onto stocks, the higher your probability of experiencing positive performance. Before I delve into the rosy side of owning stocks, let me start with the [sometimes] bitter aspect of owning stocks. Any single calendar year can be a frightening experience, such as the 39% decline suffered by the S&P 500 Index in 2008. Worse still, the peak-to-trough decline in the S&P 500 Index was 57% (chart below).

Many Baby Boomers vividly remember the 14% interest rate on their first home mortgage. It's akin to a rite of passage for some of them. They almost recall it as a fond memory, it seems. With memories of the high inflation and high interest rates of the 1970s and 1980s seared in their minds, it is not uncommon for Boomers to be fearful about another round of soaring interest rates. I have come across Baby Boomers whom look upon bonds with great skepticism, for they anticipate swiftly rising rates will lead to poor returns for bonds.

The S&P 500 closed at an all-time high of 2,198.18 yesterday, November 21, 2016. As I write this post, the Dow Jones Industrial Average is trading over 19,000 for the first time in its history. In fact, the last time all the major domestic stock market indices (S&P 500; DJIA; Russell 2000; and Nasdaq) closed at all-time highs was way back in December 1999.