All investors are feeling the same way right now, and that is one of the reasons we are seeing such big moves daily in the markets. So what are we to do at this point?
We are remaining patient as we consider when to rebalance our portfolios to take advantage of the lower valuations. We know it is impossible to pick the exact bottom of the market and understand that when looking back at history it has typically been more beneficial to be a little late to the recovery than to be too early. In fact, Dan Suzuki, CFA of RBA Advisors points this out in his 3/18/2020 note titled, “Don’t Panic. Be Patient “. (1) There he looks at all past bear markets and compares the returns of an investor who adds to stocks 6 months before the bottom vs. an investor who waits 6 months after the market bottoms. He then measures both hypothetical investor returns a year later. What did he find? His research showed that in all past bear market bottoms not only do returns tend to be better for the “late” investor, he also shows the “late” investor returns were never negative.
The other is to remember that volatility tends to smooth out as time goes on. The chart below shows that since 1950, one-year returns on stocks have ranged from -39% to +47% (talk about wide swings!). However, as you move out 5, 10, & 20 years volatility actually decreases substantially and the returns in stocks tends to be positive.
(1) Dan Suzuki, Don’t Panic. Be Patient, RBA Quick Insights, March 18,2020
Lastly, if you are unsettled — you are human. To experience anxiety is a completely normal and natural reaction of the day by day, hour by hour, informati virus implications on both our personal and financial lives. Taking a historical perspective helps inform our investment decisions but we also understand when you are in the moment, it cannot entirely eliminate all fears and concerns. As our clients and friends, we are here for you and are happy to talk to you about any concern, fear, or what is troubling you the most. Please don’t hesitate to contact us.
Arthur Haws, CFP®
CEO & Managing Partner
The opinions expressed herein are those of HawsGoodwin Wealth, LLC and are subject to change without notice. Nothing in this material should be construed as an offer to purchase or sell any product or security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
The S&P 500Ò Index is the Standard & Poor’s Composite Index and is widely regarded as a single gauge of large cap U.S. equities. It is market cap weighted and includes 500 leading companies, capturing approximately 80% coverage of available market capitalization.
The Bloomberg Barclays US Aggregate Bond Index is a broad base, market capitalization- weighted bond market index representing intermediate term investment grade bonds traded in the United States.
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