It has been a fast and volatile ride in the market so far this year. After three years of double digit returns we are seeing a correction in the market. It is important to remember, corrections are a normal and a healthy part of the market and economy. It’s like the Spring needs rain and cloudy days to produce Summer. It is setting up and creating a base for the next leg up- it is temporary but necessary.
We just wanted to quickly and concisely review our core beliefs when it comes to the market and investing below:
With stock market volatility comes the temptation to try to “cash out” and then “getting back in” to time the market. Before making that attempt, know these 10 facts!
1 .) No one can predict what the stock market is going to do over the short term.
2.) As an investor in the stock market, it is essential you develop a tolerance to accept corrections, bear markets, and volatility. Simply put, it is part of investing.
3.) if you attempt to time the market and go to cash, the odds of you “getting back in” at lower levels is very low. Therefore you miss the strongest recovery rally.
4.) We at David Adams Wealth Group will never attempt to “time the market.” (instead, we make strategic allocation shifts, rebalance in dislocated markets, and tax/loss harvest- all things to add value during volatility)
Why do not attempt to “time the market?”
5.) if you are in cash and miss the 20 best days, your annual return is less than 1%. *
6.) 15 of those 20 best days are typically within 2 weeks of the worse days.*
7.) The average return 30 days after the bottom is 16.26%.*
8.) the average return 60 days after the bottom is 22.96%*
9.) on average, the market makes new highs after the bottom of a bear market within 9 months. *
10.) as your financial planning team, we have successfully navigated through many corrections and bear markets. We will navigate through this one just like we have done in the past.
Our Next Steps
- For those who have cash on the sidelines and have been sitting on the cash, now could be a good time to begin to work this into the market. Historically, buying corrections like this have produced some of the largest returns for investors.
- For those who do not have cash but our fully invested. Do you need the cash in the next two years? If not, we believe you are still positioned appropriately. We also understand that now can be a time of stress and worry. If you find that you are someone who is worrying right now, lets meet and discuss your plan.
- From a portfolio standpoint, we continue to make strategic shifts as we see fit. Our next big move if the market continues to decline will be to rebalance our portfolios to realign with their intended allocations. For both those that have cash to add to the market and those that don’t, this will help to add some more into equities and buy into stocks while they are lower.
Stick with your plan, keep an emergency fund of cash at all times, dollar cost average each month with new money (if you can), and focus on the things you can control. We are here for you everyday!
Holding investments for the long term does not insure a profitable outcome. Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected.