What Now?

The past several weeks have been a fertile environment for those in the "annual end of the world is starting" financial media. The clarion call countless times each day is "what should you do with your money now?" Generally, the answer is absolutely nothing, assuming that your long term goals and long term portfolio match.

Each and every year we have these "end times" events. The attached chart shows the calendar year returns for the S&P 500 (without dividends) for the past 31 years. 24 of those years are positive return periods and 7 were negative. The intra-year declines in these years averaged 14.3%. That's right, the end of the world event happens every year (but it really doesn't). From the April market peak, the recent "wiggles" took the market down about 18%. So, experiences like those we just went through are about what we would expect as normal. Absent luck (chance), these yearly events can't be timed.

It is important to understand that we are neither economists nor market timers. We are financial planners. We don't know (nor does anyone else) what next week or next month might bring. We build what we call purposeful portfolios around personal goals. These goals form the basis of all our decisions, not particular economic or market outlooks. Unless your goals have changed (to fund retirement, education, buy a house etc.) there is no reason to react to short term market noise. You can sleep well at night regardless of what is going on around you.

It is never "different this time" even though our emotions tug at us to believe it is so. I will admit, however, that the persistent drumbeat from the media 24/7 makes staying the course more difficult now than in previous times. Over the years I have had met many excellent financial journalists, but it seems today, in some cases, the media is the mortal enemy of investors.

The attached brief video (under 2 minutes) discusses these themes in more depth. We started out almost 30 years ago to change the way investors think about money. Don't keep us a secret.

James Wilson Video - What Now?

  - James E. Wilson, CFP®