It sounds trivial, but thinking of market volatility as an FEE rather than a FINE, is an important part of developing the kind of mindset that lets you stick around long enough for investing gains to work in your favor.” – Morgan Housel, The Psychology of Money

 

Even through Black Friday of 1987, the Tech Bust in 2000, 9/11 in 2001, The Financial Crisis in 2008 and COVID in 2020, the investment markets continue to grow and prosper, far exceeding the growth of cash or gold. These events were not predicted and there will be future events that will negatively impact markets that won’t be predicted. We know they’re going to happen, but we never know when. Trying to time these events is futile and making a move too early can significantly reduce your upside to the extent that it is detrimental to your returns, even if you eventually sidestep the inevitable negative event.

We saw this in action in the 2010’s. After the Financial Crisis, when analysts kept predicting a significant pull-back year after year. The MSCI World stock market index grew substantially from 2009-2018.  Through that whole time period,  "experts" kept warning of a market crash but “the pull-back” didn’t come until the last quarter of 2018, and quickly recovered in 2019. Is it worth missing a short decline if you also miss a much greater long-term gain?

We find ourselves today, coming off a couple of strong years of return. Although there are some headwinds, there are also many tailwinds such as efficiencies from artifical intelligence, decreasing interest rates as well as deregulation & corporate tax reform in the US, which can all help companies grow. But you wouldn’t know from listening to the daily news as they talk deficits, tariffs and geopolitics.

Stay on course with your plan that is designed for your specific goals in mind and ignore the short-term noise. We are constantly evaluating the holdings in our portfolio and rebalancing when needed. We hedge our bets by taking appropriate overweight or underweight positions when warranted and include a variety of investments that have a great opportunity to grow, even when stock markets aren’t, to protect on the downside. We regularly update your financial plan to understand if we should shift the portfolio to match your changing needs.

We are bound to see some volatility, it’s the cost for those good returns , and it’s worth it!

Eydt Wealth Partners