Articles

One of the biggest risks to your portfolio is your emotions. That may seem like a harsh statement but the biggest favor someone can do for themselves when it comes to investing is not listen to the day to day noise about the market.  Ignore the Jim Cramers of the world and focus on long-term investing.

From 2009 to 2016, nine different and well-respected publications made remarkably similar comments regarding the current state of the market.

Barron’s, Nov. 2009: “The Easy Money’s Been Made” 
Morningstar, Dec. 2010: “The Easy Money Has been Made” 
Market Watch, Nov 2011: “The easy money has already been made” 
TheStreet, May 2012: “The Easy Money Has Been Made” 
Morningstar, Dec. 2013: “The Easy Money Has Been Made” 
Barron’s, Oct. 2014: “The Easy Money Has Been Made” 
CNBC, Mar. 2015: “The easy Money has been made” 
Globe and Mail, Apr. 2016: “The Easy Money has been made” 
Barron’s, Oct. 2016: “The Easy Money has been made”

If you had acted on their advice, you would have missed quite a nice run in the markets over the last several years.  Recent volatility understandably creates some angst, but enduring volatility is part of investing in public markets. It is not something to fear or to try to avoid if you are prepared to endure it. 

The best plan for long-term success in the markets is constructing a portfolio that fits your goals and objectives. When clients ask us, “What’s the best portfolio?” we often respond with, “The one you can stick with.”

Letting too much emotion into your decision-making process leads to unforced errors in your investments.  People often feel most optimistic when markets are up and fear when it is down. The slide below shows the process some investors take when it comes to their investments.

Another chart shows the long-term performance of the S&P over 27 years and how if you miss just the best 25 days out of over 6,500 market days your return is cut by over 50%! 

Both of these help illustrate why we recommend to try and drown out the day-to-day noise in the markets and stick to your long-term goals, and stay invested through both up and down markets. When our clients understandably get nervous during times of market volatility, we often refer to these charts to illustrate the importance of staying invested and having a plan.

There is a saying that sums up both of these concepts nicely, “It’s not about timing the market, it’s about time in the market.”

Helping clients stay disciplined, as well as managing expenses, turnover, and taxes is always top of mind when we create client investment portfolios. Nobody knows what is going to happen in the markets from one day to the next, but history shows that staying invested produces the best results. While it is impossible to avoid all the noise in the media pertaining to the markets, maintaining your focus on your long-term objectives will prevent you from reacting based on the emotion that market volatility can cause.