A time to Reflect ... Not react
China's attempts to shore up its domestic growth through currency devaluations and aggressive monetary stimulus have unnerved many investors around the globe. As a result of this and other macroeconomic events like the drop in oil prices and the uncertainty surrounding rate lift-off in the US, equity markets have sold off sharply and volatility has spiked.
These extreme short-term gyrations can be quite stressful, but are an excellent time to reflect, not react. The investing horizon for most investors is measured in years, if not decades - not days. Therefore, it is most appropriate - and fiscally responsible - to consider the implications of risk over a time frame that extends beyond today's headlines.
Reacting to short-term volatility and chasing the accompanying trends can be quite dangerous. First, it's a certainty that the incremental turnover and related transaction costs will eat into your portfolio's returns. Second, and even more importantly, there's a very good chance that you will get whipsawed by the sharp moves - selling after prices have already fallen, and buying back after prices have reverted to former levels.
We may sound like a broken record but we are going to repeat what we said in our Market Update we sent out in July of this year, because it still holds true ...
The financial plans we recommend, take into account bumps in the road because no one can predict the future with certainty. There will be ups and downs in life and in the financial markets. We need to be looking past the daily gyrations and keep our focus on the long term strategy and the broader perspective.
If you have a longer time horizon before needing to draw on your savings, you have time to withstand these market fluctuations. As has been the trend for more than 200 years, stocks will recover from declines and rise above.
The long-term disciplined investor is the one who has historically been rewarded.
If you are in or nearing retirement, or drawing an income from your account, we are using our Income Withdrawal Strategy™, which we have designed to minimize the impact of volatility to your portfolio.
We truly value the trust and confidence you have placed in our Spectrum team and want to be sure that we are actively addressing any concerns you may have. Please be sure to reach out to us whenever a question or situation arises and we will help in any way we can.
Sincerely,
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