When it comes to participating in the market, turbulence is commonplace. There is a strong emotional factor that impacts markets in the short-term, and stocks are prone to some very uncomfortable gyrations. It’s an important consideration when an investment policy is put into place – finding an investment mix that balances the need for growth while moderating some of the “craziness.”
One additional lesson we can take away from 2020: history doesn’t always make a great guide for the future. Because something rarely (or never) happened in the past is not a guarantee that it
happen. Bear market declines typically occur over a number of months, not a few weeks. But every bear market has a different catalyst, and a global pandemic is thankfully not a common occurrence. Yet, it provides one more example of how a diversified portfolio (including a chunk of boring old bonds) can help us ride out the unforeseen (and sometimes unprecedented) shocks that inevitably pop up from time to time.
So how do you deal with the unknowns? We know we sound like a song that is being played over and over, but it is a good song that consistently fits the “mood” – we create an investment policy that takes into account your ability to take risk financially and psychologically, and stick with it no matter what the market delivers. It works! And thank you for sticking with us.