“It’s different this time” is a phrase that’s been used so often that, as prophesied in Aesop’s Fable “The Boy Who Cried Wolf“, you can’t use it now to attract attention, even though you may really need to. But while COVID 19 is a mortal threat to many, we are already learning how to adapt and limit the deadliest risks.
As we are already seeing in China, this will pass. Life will return. Rest assured, it will be different. There will be scars. Lessons will be learned. It will take time to fill in the holes. If we let history guide us, we will recover.
Just as we knew that there was the potential for a pandemic like COVID 19, among many future possibilities, there is potential for inventions and other breakthroughs that can transform economies. Proof is in the recent accelerating rate of change that continues to accelerate.
Against this background, Jake DeKinder and Mark Gouchner of Dimensional Fund Advisors provide a valuable perspective on the market volatility preceding the webinar they recorded on March 13, 2020. They provide their perspective from a portfolio of sources: a question, two sets of returns, and one investor’s 3 simple truths.
Question: Was the stock market working when prices dropped in response to recent news?
Returns 1: In the recent past, investment returns following a market peak are only slightly lower than returns following a market bottom:
Returns 2: the cumulative return of the S&P 500 from March 1, 2010 through February 29, 2020 had grown to over 360% of its beginning value. And, while the recent decline is significant, it appears as a small drop against the ten year growth.
One investor’s 3 simple truths for a great investment experience:
1) Look at market returns in terms of decades,
2) To be a long-term investor, you have to have a long-term horizon
3) Rely on a financial advisor for
a. technical advice,
b. managing your emotions,
c. bringing discipline, and
d. helping think through how to make your best decisions today to get the best possible outcomes into the future.
The webinar ended on a high note. The investor who had described 3 simple truths for a great investment experience found that he worries less about the future and about the present. Not only that, he finds that while the markets continue to go up and down, he doesn’t.
We hope this message helps you worry less about the future and the present and avoid going up and down when the market does. If not, let’s talk. Or find another reason to contact us. We’re here to help.
Please feel free to share this message with others who may want to worry less or avoid going up and down.