Should we always expect the unexpected?

I would not say that investing is based on ‘unexpected’ results.  We save money or better yet, invest money, with the knowledge that investments go up over time.  I think it is safe to say that we expect to have our investments grow over time and that we would not participate if that was not the case.

This leads me to our volatile market as of late January 2018.  Have we already forgotten that the S&P500 is up about 20% since the Presidential Election in November 2016?  This takes into account that 2018 is negative by 4% YTD*.  However, the media as well as Joe Public would have you believe that we have somehow lost all of our gains.  Sorry folks, I do not mean to confuse the situation with the facts, but the markets are still positive since November 2016.

What are we are seeing with the market then?  We are experiencing what the market has done for many years — it is cooling off or going down.  Does that mean it will be a long-term of down?  Absolutely not since historically speaking the market always ends in the positive, long-term.

After 13 years in this business I have come across many consistencies with all investors.  Some good and some bad.  The one that sticks out the most is a comment made by those young and old. “Darin, my neighbor, Uncle, mom, [insert whoever you like] lost all their money in the stock market when it crashed in 2008-2009.”  To this I respond, what did he or she do?  “No Darin, the stock market lost it.” 

Again, let me not confuse the situation with the facts.  Unless this family member or best friend was solely invested in one company or stock that happened to go out of business in 2008-2009 then the stock market did not lose this person’s nest egg.  The most likely scenario is that the investor in question decided to apply a short-term solution to a long-term problem.  They sold their investments when they were down thus affectively ‘locking in their losses’.  Unless I am missing something here Mr. Market did not lose their money, they lost their money by not understanding how the market works. 

I do understand and emphasize with you as no one wants to see their values go down.  However, that is part of the equation.  We have to ride it down so that we can ride it up.  This recent bout of volatility is not to be unexpected nor will it be the last time we have to hop on an unwanted rollercoaster ride.

As with all my advice, keep the long-term perspective and you increase your chances of realizing the returns you expect.  Like all storms, this too will pass.  The sun will rise tomorrow regardless of the direction of the stock market. 

Educate yourself, plan and seek objective counsel and I bet you do not view future stock market gyrations as unexpected.  

Until Next Time…. 

Darin

*Source: AdvisoryWorld Software & Bloomberg