We wanted to take this time to provide you with a brief refresher on market cycles. With the total U.S stock market and international markets up more than 193% and 124% respectively since their lows of March 2009, patient long-term investors — like you — certainly have much to celebrate.
While strong bull markets like these can have a major impact on your portfolio, one of the biggest determinants of the success or failure of an investment portfolio — in our experience — is simply this: emotions.
As this Cycle of Market Emotions chart illustrates, it is all too easy to let emotions guide how we react to market movements. Exuberance or panic can cause us to buy high or sell low — and thereby potentially compromise, even derail, our long-term financial plans. Sadly, we can’t predict the future, and were skeptical of those who try. But since 1926, we’ve seen down markets in America (as measured by the S&P 500) occur about 27% of the time.1 And this isn’t necessarily a bad thing. Periodic market declines are the necessary and normal price of successful investing. You can’t earn the long-term historical returns of global markets without experiencing some ups and downs along the way. To state the obvious, if there was no risk, there’d likely be no return. Our role as your Advisors is to help you manage through bear and bull markets and keep you on track towards what matters most — achieving your long-term goals. We work with you to do this in at least three crucial ways: • Rebalancing your portfolio periodically so it stays aligned with your goals • Making sure emotions and short-term thinking don’t compromise your future • Not trying to outguess markets We would like to set aside some time for us to go over any questions you may have. We’d also like to review how you are doing in terms of your wealth plan and investment portfolio, as well as your progress towards your goals. We want to make sure you are well positioned, no matter what the markets are doing. As always, I encourage you to call us at (703) 293-3100 if you ever have any questions or items you want to discuss further or if you want additional perspective on your portfolio and why we invest the way we do.
CRSP data provided by the Center for Research in Security Prices, University of Chicago. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 01/2014, all rights reserved. Cycle of Emotions Chart created by Loring Ward 01/2014. 1There were 24 down calendar years out of the 88 total calendar years tracked by the S&P 500. 24/88 = 0.2737.