A Simple Yet Difficult Truth

So, I thought that with the current events that are surrounding us today, it would be a good time to revisit an idea that I wrote about last Spring (2019).  As we sit today, April 3rd, 2020, we are in the midst of the worst health crisis to date.  Even through this time, a Simple Yet Difficult Truth remains.  This truth is evident whether it’s during the Coronavirus pandemic or anything that may come after.

“Investing is simple, but not easy.”  – Warren Buffet

It only makes sense that if something were simple then it would be easy.  Unfortunately, that’s not always the case.

Let’s take being healthy.  Whether you choose to exercise, diet or both, the goal is to burn more calories than you take in.  It’s been long said that the surefire way to invest is to buy low and sell high.  Both are simple ideas but both are extremely difficult for the vast majority.

The Battle

These two ideas are difficult because we want to realize the pleasure of meeting our goals in the short term but often, they’re accomplished over a period of time.

A piece of pizza or slice of pie today sounds better than losing a few pounds over the next few months.  Making ourselves feel better by making changes to our portfolio today gives us the feeling of having control and instant gratification but may result in a long-term cost.

 Watching the Market/Account Value

Constantly watching the market, financial news or portfolio returns are some of the worst things investors can do.  The reason is that in the short term, investment returns can fluctuate wildly, even though the value of the company that someone is invested in rarely changes.  Let’s just think back a short time ago to Dec. 2018 and Jan. 2019.

Be ready for Ups and Downs

Whether we’re in a Bull Market or a Bear Market, Ups and Downs are normal and we shouldn’t be surprised by either.

*Over the past 38 years, the S&P 500 has experienced intra-year losses of greater than 10% more than half the time. But don’t fret. Even in those volatile years, the S&P 500 still generated positive annual returns 68% of the time. If we trade based on fluctuations, we may be leaving a lot of future returns on the table.

If we would have just taken a short nap, starting fall 2018 and woke up in the spring of 2019, we would have seen that little had changed in the markets and would think that much hadn’t taken place.  We would have missed the events in Dec. and the following rally that took place.  We would have woken up noticing very little change in our investment portfolio.

If anything, this should teach us a very important lesson.  The best thing we can do is to stop looking at our investments if the Ups and Downs make us uncomfortable.  We can’t control how much and how often the markets go up and down but what we can control is how much of it we experience.  It just a simple matter of how often we look.

*JP Morgan, Guide to Retirement. Dec 31, 2018

By the way, if you have friends or family that would benefit from this blog feel free to share.

The opinions voiced in these articles are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly. No strategy assures success or protects against loss.