Heavyweight boxer Mike Tyson famously said, “Everyone has a plan until they are punched in the mouth.” While he wasn’t talking about investing, we can easily apply it to that topic as global stock markets surely punched investors in the mouth as news first started circulating in early 2020 as the world tried to understand what would later become a pandemic. Fast forward to today and the Delta variant could potentially create renewed fears and thus a return to market volatility.
Despite the punch in the mouth in 2020, and potential for fear on the horizon (which there is always something to generate fear, right?), you as an investor should be commended and congratulated. We know the market’s ups-and-downs can be emotionally taxing and our advice to stay the course may seem trite, but time and time again, staying focused on your plan has worked. That’s why we feel taking time to reflect on what has worked is important for investors.
With the recovery from last year’s decline and continuation of the markets advance to reach all-time highs for popular indexes in August,1 we thought it would be helpful to revisit three key aspects of your plan as a reminder of why we do what we do.
First off, the foundation of your investment plan is diversification. A lot of time, energy and resources are allocated to researching and selecting asset classes and funds or ETFs that historical evidence has shown to benefit investors in the long run. We know that these strategies won’t pan out every day, but the more time we give them, the greater the opportunity for them to add value. We also don’t place all our faith in one asset class or strategy to deliver potential investment success. We allocate between cash, bonds, and stocks of some of the globe’s best companies. And, the stocks we invest in come in all sizes and styles.
The second part of your plan is education. Our minds might easily latch on to an elegant explanation of what is currently driving markets up or down, or our fight-or-flight instincts may kick in at the wrong time leading to an investment decision we may regret. This is why we feel it is beneficial to provide historical perspective and balance to what we hear from the talking heads on tv and radio. And, this is what we attempt to accomplish with our one-on-one meetings and from the articles and communications we regularly send you.
The final, and most powerful, part of your plan is our focus on what is important to you: Your Goals. When investors ask us to give them the best performing portfolio we have, we ask, “Why?” The best-performing portfolio changes all the time, and we would rather give our clients the best portfolio for them. That is one that considers your ability and willingness to take risk and your life goals.
Where markets go from here in 2021 and beyond is really anybody’s guess. Will we receive another “punch in the mouth” in the near term? It is all but guaranteed to come at some point in the future, for known or unknown issues. However, with a confident plan in place and a healthy dose of investor discipline, our recommendation is that we stay the course and to keep in mind that your plan should only change when your goals change.
If you have changed jobs, want to see if you can retire earlier, plan on moving, or have a child preparing for college, please reach out. We’d love to hear about these changes and see if your current plan needs to be updated.
This information is for educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Investing involves risk, including loss of principal. Information from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. By clicking on any of the links above, you acknowledge that they are solely for your convenience and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party websites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.