Tuning Out the Noise
“When faced with short-term noise, it is easy to lose sight of the potential long-term benefits of staying invested.”
March 2020
For all of us, it can be easy to feel overwhelmed by the relentless stream of news about markets and COVID-19. Being bombarded with data and headlines presented as affecting our financial well-being and health can evoke strong emotional responses from even the most experienced investors. Headlines from the so-called lost decade–the 2000s, when the S&P 500 ended below where it began–can help illustrate several periods that may have led investors to question their approach.
March 2000: Nasdaq Stock Exchange Index Reaches an All‑Time High of 5,048
April 2000: In Less Than a Month, Nearly a Trillion Dollars of Stock Value Evaporates
October 2002: Nasdaq Hits a Bear-Market Low of 1,114
September 2005: Home Prices Post Record Gains
September 2008: Lehman Files for Bankruptcy, Merrill Is Sold
While these events are more than a decade behind us, they still serve as an important reminder of past uncertainty. For many, feelings of elation or despair can accompany headlines like these. We should remember that markets are frequently volatile and recognize that, in the moment, doing nothing may feel paralyzing. However, if one had hypothetically invested $10,000 in US stocks in January 2000 and stayed invested, that would be worth approximately $32,400 at the end of 2019.
When faced with short-term noise, it is easy to lose sight of the potential long-term benefits of staying invested through periods of uncertainty and fear. While no one has a crystal ball, adopting a long-term perspective can help change how we view market volatility and help us look beyond the headlines.
The Value of a Trusted Advisor
Part of being able to avoid giving in to emotion during periods of uncertainty is having an appropriate asset allocation that is aligned with your willingness and ability to bear risk. That includes a healthy mix of stocks and bonds with as much diversification as possible across large and small companies, in the US and outside the US, and high quality bonds. It also helps to remember that if investment returns were guaranteed, you would not expect to earn a premium. Creating a portfolio you are comfortable with, understanding that uncertainty is a part of investing, and sticking to a plan will ultimately lead to a better investment experience.
However, as with many aspects of life, we can all benefit from a bit of help in reaching our goals. The best athletes in the world work closely with a coach to increase their odds of winning, and many successful professionals rely on the assistance of a mentor or career coach to help them manage the obstacles that arise during a career. Why? They understand that the wisdom of an experienced professional, combined with the discipline to forge ahead during challenging times, can keep them on the right track. I can play this vital role for you. I am here to provide the expertise, perspective, and encouragement to keep you focused on your destination and in your seat when it matters most.
Having a strong relationship with me can help you be better prepared to live your life through the ups and downs of the market. That is the value of discipline, perspective, and calm. I am here for you day or night when you need to talk with someone about your financial life. If we stick together we will persevere through this difficult time and ultimately come out ahead of those who panic and make rash decisions.