What do the following headlines have in common?
- “Credit Suisse: Investors are worrying too much and are going to miss out on big market upside ahead.”
- “Ron Paul calls for market meltdown, warns that stocks are 'destined to go down' as much as 50 percent.”
- “Guggenheim investment chief sees stocks rising 20% more before a recession-fueled sell-off.”
- “Market correction of 30-40% could be coming soon, investment guru Mark Mobius warns.”
- ‘'’Sell in May and go away' doesn't apply this year, market bull Tony Dwyer says.”
If you guessed they were stories published in the last couple of years on a major business news website, you would be wrong. They were actually stories published THIS WEEK on a major business news website!
The Information Age has led to a constant bombardment of data that is presented as impactful to our financial well-being. These headlines can evoke strong emotional responses from even the most experienced investors, but how can we avoid being overwhelmed by the relentless stream of news about markets?
A look back to the not too distant past can serve as a helpful reminder. Headlines from the ”Lost Decade”[1] illustrate several periods that may have led us to question our investment approach.
- May 1999: Dow Jones Industrial Average Closes Above 11,000 for the First Time
- March 2000: Nasdaq Stock Exchange Index Reaches an All-Time High of 5,048
- April 2000: In Less Than a Month, Nearly a Trillion Dollars of Stock Value Evaporates
- October 2002: Nasdaq Hits a Bear-Market Low of 1,114
- September 2005: Home Prices Post Record Gains
- September 2008: Lehman Files for Bankruptcy, Merrill Is Sold
While these events are now a decade or more behind us, they can still serve as important reminders today. For many, feelings of elation or despair can accompany headlines like these. We should remember that markets can be volatile and recognize that, in the moment, doing nothing may feel paralyzing. Throughout these ups and downs, however, if you had hypothetically invested $10,000 in US stocks in May 1999 and stayed invested, that investment would be worth approximately $28,000 today.[2]
Exhibit 1. Hypothetical Growth of Wealth in the S&P 500 Index, May 1999–March 2018
© 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Not representative of an actual investment. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
When faced with short-term noise, it is easy to lose sight of the potential long-term benefits of staying invested. While no one has a crystal ball, adopting a long-term perspective can help change how investors view market volatility and help them look beyond the headlines.
THE VALUE OF A TRUSTED ADVISOR
Part of being able to avoid giving in to emotion during periods of uncertainty is having an appropriate asset allocation that is aligned with your willingness and ability to bear risk. It also helps to remember that if returns were guaranteed, you would not expect to earn a premium. Creating a portfolio investors are comfortable with, understanding that uncertainty is a part of investing, and sticking to a plan may ultimately lead to a better investment experience.
However, as with many aspects of life, we can all benefit from a bit of help in reaching our goals. The best athletes in the world work closely with a coach to increase their odds of winning, and many successful professionals rely on the assistance of a mentor or career coach to help them manage the obstacles that arise during a career. Why? They understand that the wisdom of an experienced professional, combined with the discipline to forge ahead during challenging times, can keep them on the right track. The right financial advisor can play this vital role for an investor. ATX Portfolio Advisors® can provide the expertise, perspective, and encouragement to keep you focused on your destination, and our Fee Only (When You're Up) pricing can make it a little more bearable to stay in your seat when it matters most.
A recent survey conducted by Dimensional Fund Advisors found that, along with progress towards their goals, investors place a high value on the sense of security they receive from their relationship with a financial advisor.
Exhibit 2. How Do You Primarily Measure the Value Received from Your Advisor?
Source: Dimensional Fund Advisors. The firm surveyed almost 19,000 investors globally to help advisors who work with Dimensional better understand what is important to their clients.
Having a strong relationship with an advisor can help you be better prepared to live your life through the ups and downs of the market. That’s the value of discipline, perspective, and calm. That’s the difference ATX Portfolio Advisors® makes.
If you are looking for an advisor that can help you tune out the noise, get in touch.
[1]. For the US stock market, this is generally understood as the period inclusive of 1999 - 2009.
[2]. As measured by the S&P 500 Index. A hypothetical portfolio of $10,000 invested on April 30, 1999, and tracking the S&P 500 Index, would have grown to $28,408 on March 31, 2018. However, performance of a hypothetical investment does not reflect transaction costs, taxes, or returns that any investor actually attained and may not reflect the true costs, including management fees, of an actual portfolio. Changes in any assumption may have a material impact on the hypothetical returns presented. It is not possible to invest directly in an index.
Source: Dimensional Fund Advisors LP, adapted from the May 2018 Issue Brief.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit.
All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.