Back in June 2008, I remember fielding calls from clients who were pretty sure they would spend their retirement years living under the Smithfield Street Bridge. As 2008 and early 2009 brought financial markets to their knees, we felt their pain. In lighthearted moments we would laughingly say maybe we needed to change the name on the door of the office from The Musuneggi Financial Group to The Musuneggi Dog Walking Gang. But the fact is it was more important for us to hold on to the belief that “this too shall pass”–and it did.
In 2014 we began to advise clients that we were at the historic highs of the stock market…and we had bond rates that were at historic lows. Double whammy! And although there is no crystal ball, and past history cannot predict future history, we do believe that history can lend some perspective.
At that time, Brenden Gebben, Portfolio Manager for Absolute Capital, shared an article in which he referred to the Ned Davis Research that says during Bull Markets, on average, the stock market has historically sustained upward trends for 331 market days before a 10% correction occurs and upward for 1105 market days before 20% correction occurs. So from this view we were certainly due for a correction.
And here it is. So what are some things we need to do? What are some things we need to remember?
1. Avoid trading too frequently.
2. Stop. Don’t panic. Trust your strategies. Trust your money managers’ strategies; after all, that’s what you’re paying for.
3. Don’t get out of the market at the worst times.
4. Be sure you are diversified. There are other market segments beyond just domestic stocks and government bonds. Be sure you understand them all.
5. Re-balance sometimes. Often. Frequently. Or whenever it is appropriate for your risk tolerance and for your objectives.
6. Don’t ignore tax ramifications. Return on investment is not the same as after-tax return on investment.
7. Know that we cannot control economies, performance over the years, or returns, but we can control strategies and asset allocation.
8. And remember, in 1921 the Dow Jones was at 60. Obviously it has gone up. But to get there it has gone up and down and up and down and up and down along the way. Time can certainly be more important than timing.
No matter what the markets are doing, your investment decisions need to be those that are right for you. At the right time. In the right allocation. To review your current strategy give us a call.