Volatility in the markets is inevitable, and that has been abundantly clear the past few weeks. The most fundamental and critical rule to investing smart, however is to ‘ride out the tough times’ as one might say, which is the most difficult thing to do in times of instability. As Dr. David Kelly, Chief Global Strategist of J.P. Morgan wisely stated, “The key to successful investing is not predicting the future, but looking at the present with clarity.” This is important to understand in times of uncertainty, because too many investors focus on their short-term emotions, rather than long-term results.
Take the year 1980, for example, when the S&P Index dropped 14% in one month. Looking at the bigger picture, however we saw the Index grow 28% overall at the end of the year. In fact, intra-year drops over 4% have been extremely common since 1980, with 29 out of the past 35 years yielding a positive return.
These market corrections are natural, and it is imperative to not make rash decisions. Overreaction is expected, but it is also important to remember that selling when the markets take a wrong turn guarantees the lost opportunity for potential growth.
As we meet with our clients, we are always discussing ways to minimize risk to meet your specific goals. Many of our clients have utilized the benefits of indexed annuities and insurance products, which are guaranteed to never lose value due to the markets, while still providing upside potential, a powerful tool for those wanting to eliminate risk in their retirement portfolios. If you’d like to know more about those products, please let us know!
We are continually monitoring the technical and fundamental states of the markets, and are alerting our clients on an individual basis if there are any changes that we recommend. The investment strategies we implement for our clients focus on long term success, and is created to withstand short term market adjustments.