Throughout history there have always been ample reasons to sell. Just take a look at chart below:
If you recall, a lot of these shocks were “This Time It’s Different” events in the eyes of investors (and so-called market experts). In some cases, the event was going to fundamentally alter the world as we knew it and/or so badly damage our financial systems, we’d never be able to recover from it.
Remember the sheer panic feelings during The Dot Com Bust, September 11th, The 2008 Financial Crisis or in the throes of the COVID Pandemic? I sure do because I’m human too and felt those feelings too. I am in no way minimizing the seriousness of those crises. It’s perfectly normal to have those feelings, where you get yourself into trouble is when you act on those feelings.
Today, with the stability of the world’s financial system in question, high inflation, war in Ukraine, China threatening Taiwan and what looks to be the most highly politicized presidential election in our history coming up, we have plenty of things to keep us up at night.
I don’t know if we put in a bear-market bottom last October but with the S&P500 around 4,100 as of this writing, it is up a little more than 16%. Time will tell if it holds. What I do know is for us long-term, goal focused investors the biggest risk is not being in the next 20% leg down…. it’s being out of the next 100% leg up. If you recall, for the vast majority of you we have a solid plan that has been tested against these scenarios and your probability of success remains high. As always, the largest variable to your plan is your own emotions.
Take a look at this next chart. It vividly illustrates the effect of what missing out on the best market days over the last 25 years can have on the long-term annualized returns of equities:
Missing the best 10 days over a 25-year period almost cuts your return in half. Once you’ve missed the best 20 days you no longer even beat the historical inflation rate of 3%, then it really starts to get depressing.
What’s worse is that the best 1-day returns are many times in the throws of a bear market when your emotions are at their highest!
We are here to help you make calm decisions in a world of chaos. Please reach out to us if you have any questions or would just like to talk to a friend you can trust. As always, it is an honor and a privilege to serve each and every one of you!
Best Wishes and Regards,
David R Henderson
This is being provided for informational purposes only, and should not be construed as a recommendation to buy or sell any specific securities. Past performance is no guarantee of future results, and all investing involves risk. Index returns shown are not reflective of actual performance nor reflect fees and expenses applicable to investing. One cannot invest directly in an index. DCH Wealth Management, nor any of its members are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. The views expressed are those of DCH Wealth Management and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates.