One of our responsibilities as an investment advisor is to help people put market news in its proper perspective, especially when the media is reporting global market corrections in the wake of political events.
If you’re reading the popular press, you’re seeing a lot of storm and fury having to do with government shutdowns, market corrections and the possibility that the Fed may raise interest rates. As the popular media scrambles to explain the unexplainable – what is going on in the markets at the moment and how long it’s going to last – we thought we’d share a headline of our own:
“The stock market is a giant distraction to the business of investing.”
So said Vanguard founder John Bogle in his 2007 classic, “The Little Book of Common Sense Investing.”
These are timeless words to invest by, as is Bogle’s deeper explanation of them:
“The expectations market is about speculation. The real market is about investing. The only logical conclusion: the stock market is a giant distraction that causes investors to focus on transitory and volatile investment expectations rather than on what is really important – the gradual accumulation of the returns earned by corporate business.”
So, while we could indulge in incredible analyses of the latest economic news – Trump, shutdowns, interest rates and so on – we won’t. We don’t want to distract you from the real task at hand.
Your job is to remember that these are the very kinds of intrinsic events that our financial planning and investment approach is meant to help you look past, so you can achieve the kind of investment success that Bogle and countless others have described.
If the gloomy headlines worry you to the point that you are wondering whether you need to “do something,” we hope that the “something” will be to call us, so we can discuss what actions – or inactions – are in your best interest. Because we owe our clients a fiduciary duty to always serve their highest financial interests, it is both our desire and our legal obligation to advise you accordingly. We take that responsibility very seriously, so don’t hesitate to be in touch if you are second-guessing your investment decisions and remember the following:
- Market drops are an expected, unavoidable part of investing.
- Our advice is simple and straightforward: Stay calm and stay the course.
- Remember why you’re investing. If you’re saving for a long-term goal, such as a retirement, your allocation already factors in a short-term market drop.
If you’re merely curious about the current market climate, we’d also be happy to have a personalized conversation with you, to answer any questions you may have. Even though we encourage you to not focus too heavily on the market’s daily activities, as financial professionals, we can’t help but find the intricacies a fascinating topic of conversation. (That probably explains why we’re such a big hit at light social gatherings.)
To sum up our stance on the current market conditions, we believe, if anything, it offers us a compelling lesson on just how arbitrary the market can be in the near-term. It’s why we emphasize taking a long-term, evidence-based view, to see your way through the years ahead. Academic studies have found that market timing costs about 1.56% in foregone returns per year!
“The stock market is a device for transferring money from the impatient to the patient.”
– Warren Buffet, The Oracle of Omaha
Our job is to remind our clients to remember this is what you and we have prepared for together. Come what may, we’re here to help you stay on your way.