Over the past 12 years, the market and economy have faced very few, if any real challenges. During this time investors have had the benefit of artificially low interest rates and an increase in the stock and bonds markets. As a result of the 2008-2009 Financial Crisis, interest rates were lowered to almost nothing, and the Feb employed a strategy known as Quantitative Easing, or QE for short.
Now, we find ourselves in a much different place. Both stocks and bonds have had a terrible first half of the year. The economic environment is much different than we’re used to with the Federal Reserve raising interest rates and tightening monetary policy. Supply Chain issues are highlighting just how much the past fiscal policy and economic stimulus are catching up to us.
As a Financial Planner, it’s been my experience that the most beneficial traits for an investor are patience and discipline.
Patience is hugely important because when the media give the newest reason why the world is ending today and things are not going as well as we would like, you’ll be able to wait through the negative headlines. Very Few investors had the patience to wait out the dot-com bubble and the 2008-2009 Financial Crisis, missing out on the recovery that followed.
Discipline involves sticking to the plan. Investment portfolios and strategies are designed to handle uncertainties and perform over time. Short-term market moves are surely unpredictable, but remaining disciplined keeps us from reacting to the uncertainty in the markets.
Many of us have heard the saying “Garbage in, garbage out”. This is even true with financial news. It’s easy to stick to a plan when we’re watching our account values go up but what about when a bear market comes, and we know it will, and our account values go down and the financial news is spewing doom and gloom? Allowing ourselves to be exposed to the negativity over time can wear down even the strongest of wills.
Investors have withstood wars, financial crises, recessions, and other worries in the past. While no investment strategy is immune to temporary losses, we must now ask ourselves “What will you do?” not “What is the market going to do?” Will you stick to your plan? My hope is that you do. Doing so will allow you to weather the storm and invest in high-quality companies that are on sale. This could potentially reap great benefits down the road.
I hope that you find this perspective helpful and if you need help with either sticking to your plan or starting one, I’m here to help. Thanks and God Bless.
Investment advice offered through OneAscent Financial Services, LLC, d/b/a Provident Oak Financial, LLC, a Registered Investment Adviser with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.