Let’s play a game. The rules are simple. I’m going to share three headlines, and you guess when these news stories appeared.
1) “The Stock Market’s Dangers Are Easier to See Now”
2) “American Exceptionalism May Be Ending — At Least in Stocks”
3) “Dow Tumbles Nearly 800 Points as Trade Jitters Return”
Here’s a hint. It wasn’t 2008.
No, it was a lot more recent. In fact, all three of these headlines appeared the first week of December 2018. At the time, the pessimism around the market and the general economy made it seem we were on the verge of another recession. The “smart bet” seemed to be cash out, stuff the money under the mattress, and hunker down until the worst passes.
Except all that pessimism came to naught. Instead, it was another year of double-digit returns for the U.S. stock market.
What’s an investor to do?
For years now, we’ve made it our mission at Strathmore Capital to help answer that question. The answer isn’t exciting enough to make headlines. In fact, it’s so simple, some folks don’t believe it can work. It’s only three steps.
1) Identify your financial goals through a well-constructed financial plan
2) Invest in a diversified portfolio that fits your goals
3) Stay disciplined
None of the steps are that complicated. They do require focus, a willingness to ask questions, and a commitment to follow through—even when the headlines suggest the end is nigh. Ultimately, we’re the buffer against the noise. Of course, we love helping folks figure out #1 and #2, but time after time, #3 seems to be where we help people most often.
When financial advisors first start out, I suspect many of us think it’s all about the numbers. Get the mix of investments right, and the bottom line will take care of itself. But a week, a month, maybe even a year, goes by and the phone rings. The anxious voice on the other end wants to know if the talking head on CNBC is right and a bear market is just around the corner.
That first phone call won’t be the last. Something will happen, either personally or in the larger world, and the very human response will be to DO SOMETHING. But if folks have clear goals and a low-cost, diversified portfolio in place, one of the hardest things we help our clients do is…nothing.
A year ago, it seemed so logical, so rational, to step away from the stock market. All the signs (at least the ones highlighted in the news) seemed to point to one, obvious outcome. You were ignoring the “facts” if you didn’t understand that the U.S. was a headed to a recession.
Here’s a fact that history seems to confirm. Attempting to guess what the market will do next is a fast track to frustration and unhappiness. I can’t (and won’t) attempt to predict what will happen during 2020. But I do know that for 15 years we’ve helped dozens of folks reach their financial goals by putting our clients first and choosing to think about wealth differently. That’s an outcome I’ll put up against any headline.