In the first week of 2016, the stock market took a tumble. It was painful to watch as it always is, and once again everyone screamed that the world is ending in the markets. Well, we do have some good news. It’s not the end of the world or the stock market.
In fact, at Wela, we’re viewing this as an opportunity to help your investments. There is a common saying to buy when others are scared and sell when they are greedy. Well, investors are scared.
If this feels like déjà vu, it’s because this comes just four months after our last bout of stock market volatility when people were again calling for the world’s end. Then we saw a great October and an overall good fourth quarter. During that time, there were opportunities to purchase stock in quality companies at low prices and position your portfolio for longer-term growth opportunities.
Let’s take a look back at 2015. The total return for the S&P 500 was +1.4%. If you were to miss the three best days of 2015 your return would be down 7.1%. That’s drastic! Interestingly enough, those best days occurred in August which was right around the time we saw some of our worst days. This very recent example proves once again that holding true to your investment strategy to achieve longer term goals and objectives is best implemented if you maintain your allocation in both good and bad times.
Long term investment goals and objectives apply to people of all ages, no matter if you’re still working on building your retirement nest egg or if you’re already in retirement. We, unfortunately, see retirees who have investment portfolios built to generate a certain amount of cash every month, who move to cash during difficult times in the market which can hurt their long term strategy of generating income while not touching their principal investment. To meet their long-term goals they need to stay true to their investment allocation.
If you feel that your asset allocation isn’t appropriate, then the time to adjust your portfolio is when the markets are doing well. It’s exactly the opposite time of when your emotions tell you to adjust your portfolio. The time to hold true to your strategy is when things aren’t going to well. Again, the exact opposite of what your emotions tell you during those times. We’ve found the ability to shun the financial media and all news headlines during times like this is a difficult task, but it tends to be one that keeps people on track with their longer-term investment goals. It keeps your emotions from overruling your logic.
Who said investing was easy? The difficulty comes from managing your emotions more than the investments themselves. That’s why we created Wela, to help individuals of all wealth amounts have an opportunity to access a real human advisor. Our advisors work with clients to help them make the best investment decision during the rough times, and also reign in their excitement during the good times. If you’re ready to get started, just click here.