Reminder About Bear Markets
Last week I provided an article from Yahoo Finance outlining how US equity markets have performed after corrections and bear markets. I am providing this chart again as a reminder that based on historical data, bear markets don’t last forever.
History shows that those that are patient are rewarded for not panicking in the midst of difficult circumstances. You can be assured that we are investing in a way that we believe long-term will be successful.
In addition, I wanted to provide the first part of chapter one from my book, “Your Money, Your Future.” We will include a second excerpt next week.
“The Real Purpose of Your Money
A Fresh Start
Ines and Mark* came to my office to discuss their portfolio. Outside, it was a bright spring morning. Conversely, their faces were full of shadows, fearful and concerned.
They had tried to invest before. However, everything had gone wrong.
The advice they received on their investments had caused them to end up with a high-risk strategy—and they had absolutely no idea that this was the case. Their portfolio had been stagnant for years. No one had
adjusted it to match what was happening in the environment. When the economic crash of 2008 occurred, they lost 50 percent of their portfolio . . . and they had not forgotten that pain.
This bad experience traumatized the couple even more than it would have affected the average person. Ines and Mark were conservative people in their mid-sixties who had been married for forty years. Their parents had experienced the Great Depression, and Ines and Mark had worked hard to build up a portfolio. Their first jobs had been in agriculture, working in a factory for less than fifty cents an hour. They knew the value of money.
The couple hoped to provide college funds for their two grandchildren, but apart from that, their goals were simple. They did not live an extravagant lifestyle. They just wanted to be comfortable and live out the rest of their lives without anxiety and concern, enjoying the fruits of their labor from the many years that they had worked.
That day in my office, I helped Ines and Mark make a fresh start with their investments. I listened carefully to their values and designed a new plan to fit their personal risk-return profile. I explained the new strategy clearly with custom charts and encouraged them to ask questions. I also put in place a plan to track and adjust their portfolio in the coming years, so that they could rest easy about the future.
Ines and Mark walked out of my office that day tremendously relieved. No longer did they have to wonder what their strategy was to achieve their goals, or invest in the dark without a compass, worried that it was too late to find success.
After years of uncertainty, they were finally on a path they understood.
The Real Purpose of Your Money
The world is changing rapidly. You only need to pick up the newspaper, turn on the TV, or browse the Web to see it. Life is moving faster. World economies are becoming more closely aligned. People are living longer. All of that taken together makes investment decisions more complicated than they’ve ever been.
Some investors try to ignore this. They put their heads in the sand and hope that, above ground, everything will magically work out.
Putting your head in the sand might have been a reasonable strategy in the past. Now it is a recipe for disaster. You need to understand what’s going on around you. More importantly, you need to understand who you are, where you stand, and what your goals are in order to invest well.
You need to understand the real purpose of your money.
Your money is not a Monopoly game. Rather, it is a tool that can be used to meet financial challenges and
That is why it is so important to understand what you are trying to accomplish with your money before
you start investing. You have goals to live a certain lifestyle, and perhaps to leave a legacy for the people and organizations closest to you. Those things can only be achieved if you put together a strategy that fits your comfort level and is designed for your unique goals.
Not every investment is a “one-size-fits-all” proposition. That’s why you can’t just read a book about how to invest in a specific asset and expect it to work for you. There are investments that will fit your personal needs and move you closer to your goals, and there are investments that could derail your strategy altogether.
Think of it like this: if you are a family of eight, you need to buy a van—not a two-seater sports car—to get you where you need to go. The investment vehicle you choose works the same way. You need the right vehicle for what you are trying to accomplish. When you gain a basic understanding of what is important to you and what kinds of risk you’re comfortable with, you empower yourself to choose a strategy that fits you.
You cannot close your eyes and expect to achieve your investing goals in a financial landscape that changes this rapidly. You need to sharpen your awareness of two things: your personal values as an investor and your understanding of the new investing environment.”
Note: *All examples listed are hypothetical and information provided does not reflect exact data for each given situation. Examples provided should not be deemed as an endorsement or testimonial for the advisor and are merely provided as an illustration of the discussed topic.