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My Notes on Market Volatility

My Notes on Market Volatility

February 24, 2022
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Some of you may feel concerned about the recent market volatility.  Here is what I would like you to consider:

Your portfolio is set up in a way that we know market volatility will occur such as we are currently experiencing.

Over the last 100 years, the market has steadily increased while experiencing temporary downturns.  We believe this is just one of those situations, a temporary downturn.  The last market downturn was fourteen years ago.  Not only did the market recover it hit a high point.

You and I have done a lot of prep work through financial planning.  If your goals have not changed and your expenses have not significantly increased, the success probability of your financial plan hasn’t changed.

Through our financial planning software, we have stress tested your sources of income, expenses, and investments, whether with LPL Financial or elsewhere.  We factor in inflation and taxes amongst all the other variables we have considered.  We have run all these numbers against 1000 scenarios, including what is currently happening in the market, to come up with your factor of success probability.

Now is not the time to sell your investments.  It may feel like the right thing to do but selling when the market is down guarantees a loss.  Right now, the loss is only on paper.

Extreme volatility leads clients to abandon discipline and make poor financial decisions.  My job is to help ensure this does not happen to you.

As one famous investor once said:  Stocks are the only thing people don’t buy on sale.  Right now, stocks are on sale.

Volatility can work in our favor.  As stock prices decrease, oftentimes, new money comes into the market ultimately propelling prices upwards.

If we take advantage of volatility rather than run from it, we can add to our long-term positions at favorable prices.

We can’t hide from volatility, and we can’t keep disrupting our plans by continuously running to the sidelines under emotional duress.

The best friend any invertor has is time. 

When we have a long-term time horizon, we shouldn’t get emotional about short-term volatility.  The longer the time horizon, the more the volatility flattens out.  Staying the course versus jumping in and out of the market has an added bonus – it reduces the risk of missing out on any possible large gain.

To quote Warren Buffet, “We’ve got to be fearful when other folks get greedy, and we’ve got to be greedy when other folks get fearful.“  He also said, Successful investors don’t focus on being with or against the crowd.  In good times and in bad, they stay focused on their goals.  They rarely change their long-term investment strategy no matter what the market does.

I continue to collect daily briefings on the markets and commentary on where the market may be heading.

At times like these, it is important to stay focused on your goals, making prudent decisions while not falling victim to the hype of the media.  Their job is to get folks to pay attention so they can share viewer numbers with their advertisers.

I hope this information alleviates some of your concern.  It is okay to be concerned.  What I don’t you to do is make an emotional decision that negatively affects your ability to reach your goals.

If you have friends or family members who are concerned about the market volatility, I am happy to speak with them.  It would be my pleasure to be a resource to the people who mean the most to you. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. Any economic forecasts set forth in this material may not develop as predicted. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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