Convictions & Perspectives- Navigating Financial Storms

Convictions & Perspectives- Navigating Financial Storms

by Mike Jette on Mar 18, 2020

In an effort to keep the lines of communication open and to share some of the helpful information we are receiving as financial advisors, we are going to do a series of emails highlighting our thoughts and perspectives during this bear market.

Larry often says, “You have to build the ark before it rains.” This is exactly what we have been doing in the past several years- building all-weather portfolios that will hold up when storms hit, because we knew a financial storm wasn’t a matter of if … but when.

The key at this point in the storm is to hold on and stay in your seat. We know people may be tired of hearing that from their financial advisor, but it is true. This isn’t something we say lightly. We know it is hard but the best strategy now to weather the storm is to stay invested.

It is tempting to pull the plug when things get bad, but that response can prove to be very costly. In fact, just missing a handful of the best days in the market can drastically reduce your returns (see chart below). This point becomes even more important when we recognize that in the past 20 years, 6 of the best 10 days in the market occurred within 3 weeks of the 10 worst days!

Markets have historically moved very quickly between good days and bad days, and our current storm is experiencing unprecedented ups and downs from day to day. It is impossible to time the highs and lows.

Bottom Line: All Bear markets are different, but they all have one thing in common … they eventually end. In navigating this bear, we have already made some small tactical moves in portfolios. At some point we know there will be opportunities to buy equities at prices we haven’t seen in years (which will be discussed in a future email).

Mike and Ben