Earthquake in Japan, nuclear meltdown, tensions in the Middle-East, rising gas prices, high unemployment, soaring deficits, and the European debt crisis—wow, what an incredible list of things to worry about! Yet, the equity markets continued to move higher. How can this be? I would argue that seeing the market go up during times of worry is nothing new. There has rarely been any period of time when there was not something going on in the world that made us worry. As investors we need to accept these constant worries as a normal part of the human experience. If your plan is to wait and get invested “when things calm down,” I am afraid you may be waiting a long, long time. We cannot let current events, no matter how awful they seem at the time; distract us from our long term investment plan. There is no disputing the fact that when a crisis hits it is scary. The markets generally will go down. Expect this. How we deal with it is the key. We must remind ourselves during these scary times that a down market is an illusion. It never lasts. The markets have a very long and predictable record of recovering from crisis, making new highs and rewarding long term investors. That is as long as you don’t panic out during the downturn and let the emotions of the crisis get the better of you.
Change your focus. We can always take solace by focusing on what we are invested in. What is the market? What do you own behind the names of your funds and the numbers on your statements? When you have a globally diversified portfolio, you have ownership in the great companies of the U.S. and the world. Why would you ever want to sell these? Are all of the great companies of the U.S. and the world going to go out of business? Are all of the great businesses that provide goods and services to you, me and billions of people across the globe everyday going to become worthless? Of course not. There will be ups and downs. This is normal and can create opportunity. There will be times when certain asset classes are more attractively valued than others. Today, many countries are growing their economies at faster rates than others. These are the things that an investment professional can help you navigate.
In the end, however, each investor must manage all the things there will always be to worry about. I don’t see the list getting shorter anytime soon. One of the greatest golfers of all time, Bobby Jones, once said, “Competitive golf is played mainly on a five-and-a-half-inch course…the space between your ears.” I think he very could have been talking about investing as well.
Damien helps individuals invest and manage risk. He is a CERTIFIED FINANCIAL PLANNER™ professional and a principal of Walnut Creek Wealth Management. These are the views of Damien Couture, CFP® and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Your comments are welcome. Damien can be reached at 925-280-1800 x101 or Damien@WalnutCreekWealth.com.
Leave a Reply