I hope that as I have gotten older, I have gotten smarter. Not only smarter about day-to-day things with my family and my job but smarter in becoming more aware of how interconnected things can be. For those of you who have been with us for many years you might remember the conversations we had regarding risk and return with your portfolio. We start every relationship getting to know you — trying to figure out how spicy (risky) or bland (conservative) to make your portfolio. Every client has different needs. Some are spenders and need a high level of income out of their accounts to live while other clients are savers and spend very little of the capital we manage. Whichever may be the case, we adjust the portfolio to compensate for this level of spending to do our best to keep you from running out of money. Over the years our clients have tended to mimic the overall economic tone of the current market cycle we were in. In the early 2000’s as we came out of the bursting of the dot.com bubble, our clients were more hesitant to own stocks but as the fear faded clients were once again ready to embrace risk. When 2008 hit and the market tumbled, the sentiment again turned to safety and that this time really was different. Well, it wasn’t — and the stock market not only recovered but has gone on to all-time highs as it tends to do. Have you noticed that the market corrections have gotten shorter and sharper? The past election and the COVID-19 slow-down have created angst, but we again remind clients how dangerous a game it is to think we know what the market is going to do.
I see lots of risks to the market today. I see lots of speculative type behavior reminiscent of stories I read in history surrounding some the most storied drops in American history like the 1929 stock market crash and the other panics that have ripped through the markets over the years. I talk to clients who want to get out of the market because they feel that they had a “sixth sense” that something is coming and have held cash and continue to do so even as the market continues to reach new highs almost daily. I see clients who are experiencing the FOMO (fear of missing out) syndrome and have chased speculative stocks that have no earnings and are nothing more than flashes on the landscape of financial history. Emotional investing is usually bad investing whether buying or selling.
We encourage you to remember these basic investing truths as we enter what could be a volatile summer. In the long run, stocks outperform bonds, real estate, and any other asset you can buy. Along the way, stocks tend to move in large waves that can be unsettling to the untrained and inexperienced. “Time in the market” is more important than “timing the market.”