On March 14, 2013, the Dow Jones Industrial Average (DJIA) set an all time high closing mark of 14,539. If you remember back to March 9th of 2009, the DJIA closed at 6,547. This was as low as the market had closed since 1997, and marked one of the darkest moments in the markets since the Great Depression of the 1930s. The S&P 500 index is now flirting with its all time high and is up significantly over the same 4-year period. So how did you fare? (Historical data provided by Commodity Systems, Inc (CSI)).
Despite the rumbling market working it’s efficiencies over the past four years, I can’t count how many people who were still reluctant to invest in the market for fear of another recession…and having to endure that pain once again. However, I would ask each of them “how much pain do they feel now that they may have lost out on the earnings potential the market have given us over the past 4-years?”
March 9th 2013 marked the 4-year anniversary of the trough of the Great Recession. Thinking back to those dark days, I was glued to CNBC each morning (just ask my wife) and listening to analyst of investment companies give their best shot at where we (the global financial markets) were headed. Did I know when the slide was going to stop? No. But neither did Ben Bernanke (Chairman of the Federal Reserve Bank), the president of the United States, or any hedge fund or investment manager on Wall Street know how long and low we would go.
Pessimists and optimists. Bears and bulls. Black and white. People like to choose sides and sometimes like to sound (or act) smarter that the average person by being a contrarian. There are still people that feel we have yet to hit the bottom of the 2008 Great Recession.
My point is this: Our psychological pain receptors try very hard to block out painful life events. And our cognitive side tries very hard to embrace and hold good memories at the forefront of our thought process. In fact, scientific studies show that humans dislike pain, loss, or the impact of being hurt nearly twice as much as they enjoy pleasure, the thrill of winning, and/or euphoria. For this reason, it is important to maintain an unemotional side to your decision making process during times of great exuberance and depression. And this applies to your investment/money instincts too.
So when I think about the countless emails, phone calls, and meetings where I had to talk my clients off of the fence (when they wanted to bail out of equity positions and ‘go to cash’ back in late 2008 and 2009), I always reverberated the phrase: “I don’t know when the market is going to turn around, I just know it will.” No, I didn’t have a crystal ball that foretold the future (I actually ‘do’ have a crystal ball on my desk—just for show), but I had faith in the global markets that returns are based on the risk that we take. And this is so true of everything else we life by!
Call my office to discuss a “sailing” and “rowing” strategy to help you navigate the stormy investment waters ahead. This is as good a time as any to discuss your investment plan!
Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal. With any investment vehicle, past performance is not a guarantee of future results. Investment strategies, including asset allocation and diversification, do not assure a profit and cannot protect against losses in a declining market. The views expressed within are not representative of National Planning Corporation (NPC), and should not be construed as investment advice. Investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. The S&P 500 is an unmanaged stock index. S&P 500 is a registered trademark of Standard and Poor’s Corporation. Investors cannot invest in the S&P 500 index. Please consult your Financial Professional for more information.