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StonebridgeMARKETS | Don’t Put Your Goals on Pause

You’re working from home, working out from home, eating, educating kids and entertaining yourself at home – as you adjust to this new routine, make sure that you are not putting your goals and dreams on pause because of market volatility.

We all have a tough time handling uncertainty. So how are we supposed to make thoughtful decisions in this environment where everything seems uncertain? How do we avoid fear-based financial decisions and putting our goals on pause?

Instead of getting distracted by all the noise, it helps to focus on a few key facts. For example, on average there has been a market correction every year since 1900. To put it another way, you’ll likely experience the same number of corrections as birthdays! Historically, the average correction has lasted 54 days – less than two months. Market volatility is routine and corrections occur with surprising regularity but never last.

Selling your investments when markets appear to be in crisis mode may feel like the right thing to do. However, decades’ worth of market data shows that staying invested through volatile times has been a smart route to take to pursue long-term life and wealth goals. For Millennial investors who may not have experienced the sharp market declines of the Financial Crisis of 2008–2009, today’s extremes may be even more unsettling. However, if you’re investing for goals 5, 10 or 30 years away, here are three reasons why you should avoid emotion-based investment decisions and continue to focus on achieving your goals and dreams.

1. Markets Have Been Historically Resilient. Despite facing decade after decade of wars, virus outbreaks, natural disasters, recessions, and financial crisis, markets continued to climb higher over the past 30 years. Consider how these hypothetical $10,000 investments allocated to stocks and bonds grew over 30 years, ending 2/28/20201.

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2.Cashing Out Has Historically Meant Missing Out. Investors who panic and sell often miss the upside if markets rebound. Consider what missing out on the 25 best days in the US stock market over the past three decades would have meant to the growth of a hypothetical $10,000 investment in the S&P 500® index2.

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Now look at the returns of the US stock market after the 10 worst months from 12/31/1985 to 12/31/2019. Investors who sold during these turbulent months would have missed out on market recoveries in the following months or years3.

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3. Time Is on Your Side. As a long-term investor, it’s wise to remember that it’s not a “timing” issue; it’s just an issue of time. Consider how staying invested over the long term has historically added up. This hypothetical $100,000 investment in the S&P 500® Index over 30 years, ending 12/31/2019, grew significantly – despite several volatile short-term market events4.

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It’s important to remember that the stock market rises over time despite many short-term setbacks. Moreover, bear markets become bull markets, and pessimism becomes optimism. Now you can see why Warren Buffet says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” He knows how quickly the sentiment can switch from fear and despondency to exuberant optimism.

The stock market isn’t looking at today. The market always looks at tomorrow. In fact, every single bear market has been followed by a bull market, without exception.

“The best opportunities come in times of maximum pessimism.”

Sir John Templeton

To learn more about our distinctive goals-based approach to life and wealth management, please do not hesitate to contact our team directly.

We look forward to continuing to provide useful insights and relevant solutions focused on helping you achieve your greatest financial potential.

Thank you for your continued trust and confidence in Stonebridge.

All the best,

Mitch

 

 

1For illustrative purposes only. Periods chosen are based on start of drawdown to maximum drawdown and recovery period. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Past performance is no guarantee of, and not necessarily indicative of, future results.
 Source: Natixis Portfolio Research & Consulting Group (PRCG), FactSet


225 Best Days for S&P 500 TR USD between 12/31/1987 and 12/31/2019. For illustrative purposes only. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Past performance is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Research & Consulting Group (PRCG), Morningstar MPI.

3Displays the 10 most negative performances of monthly returns from the S&P 500 TR USD between 12/31/1985 and 12/31/2019. Past performance is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Research & Consulting Group (PRCG), Morningstar MPI.


4For illustrative purposes only. Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index. Data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.Source: Natixis Portfolio Research & Consulting Group (PRCG), FactSet.

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