As I’m sure most of you are aware, economic and global events have always been a driving factor in the direction of the markets (aka: your investment and real property valuations). However, we are once again at a time where these events have begun to affect the markets in a more sudden and volatile manner. Does this mean it’s time to sell-out and go to cash?
According to historical data dating back to the late 1800’s, declines in market valuations of 10, 20, and 30 percent or more are completely normal, have always happened, and probably always will happen.
Should you be alarmed? Is there anything we can do? Let’s run through the incomplete list possible factors causing the valuations in your 401k, IRA, and trust accounts to fluctuate:
- ISIS/ISIL/Al-Queda threat
- Ebola Outbreak
- Ukraine/Russia conflict
- Oil Glut
- Corn Glut
- US Dollar Fluctuations
- Slower Growth in China
- Looming European Recession
- 5 ½ year growth in US stock market creating overvalued stocks
- Low Yield Environment from quantitative easing
- …and many other contributory parts of the puzzle
When you factor these and other events into the emotional realm of money and power, people tend to make ‘seat of the pants’ decisions based on what they’re feeling at that very moment. Never mind that just one month prior, those same people (possibly even ‘you’) were completely content with their performance and account holdings. Reviewing their financial statements that showed their assets valued at all-time highs made them feel good. Why then, if the fundamentals of their investments had not changed much over the past 6-weeks, would someone want to sell now?
In fact, public perception that the market (stocks, property, etc.) should only go up is a key indicator that a lack of knowledge–regarding what is normal and what is not—is problematic to investors. The investing public feeds on one of two emotions at a time: Fear or Greed. Either one of these monsters will eat you and your investments alive!!!
As your advisor (for those who are my clients), I encourage you to call and schedule an appointment with me to discuss any concerns you might have about your account. And as a reminder regarding the extent of my services with your nest egg, I do not and will not “day-trade,” nor will I attempt to “time the market.”
Day Trading and market timing have not proven to produce winning records over an extended time for anyone (except for your colleague—and everyone has one–who only tells you only what they made or won…and not what they lost).
Take a look around you, your peers, your smartest friends with money, and ask them to show you their track record over the past 5, 10, or 20-years and what they’ve done with their investments. Sure, they might make a ‘good call’ here and there. But did they (or would they) show you their bad call(s) that exacerbated their losses? How about those who never got back into the market after the 2008 recession?
I look forward to addressing your concerns during these volatile times—not running and hiding out under a desk. These are the times when I really earn my pay. These are the times that you need me to talk you off of a cliff, and help you to keep focused on your goals that we agreed upon during less volatile and irrational times. Let’s talk!
Note: The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. NPC does not provide legal or tax advice. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Investment in stocks will fluctuate with changes in market conditions. It is not possible to invest directly into an index and indices are unmanaged measures of market conditions. past performance does not guarantee future resul