March 10, 2020
One of our strategic partners, Blue Bell Private Wealth Management, with whom many of our clients are invested, sent out this newsletter yesterday. The perspective and sentiment of Kohlhepp Investment Advisors, Ltd. is aligned with what is stated here, so we are partnering with them to deliver this message to you:
Stocks dropped roughly 7% not long after the market opened yesterday. That triggered the first of three circuit breakers designed to give market participants a chance to regroup during moments of extreme volatility.
It is no secret that news of the coronavirus has created mass uncertainty through the stock market, most of which is surrounding the economic slowdown as a result of the virus. If you watch the news regularly, it may seem like this is the end of times. We are here to remind you of a few things about long-term investing.
1. Your financial, investment and retirement plan is probably not going to change
Disturbing or disrupting your long-term plan or radically changing your portfolio makes no sense. Selling today would mean locking in permanent losses. If you did, you would be transferring the proceeds to an asset class (i.e. a money market) that yields close to zero.
2. Nobody called this
Plenty of people had been calling for a recession this year but they are the same people who have been calling for a recession every year. A perfectly correct economic or market call, that cannot be repeated in the future, is worth just as much as no call at all.
3. All in or all out are terrible strategies
Investors cannot afford to miss the 25 best days in the market, or your returns are wiped out. The catch is that the 25 best days are frequently mixed in among the 25 worst days. Unfortunately, you can’t have the ups without the downs and anyone who promises you otherwise is not telling the truth. It is impossible to "time" the markets.
4. Why don't we just sell everything and wait this out?
Eleven years ago today, in March of 2009, the stock market reached its nadir during the financial crisis and stopped going down. If you had polled people that day, most would not have agreed that we had seen the bottom. The economic headlines were not improving. Within 3 months, the stock market had climbed 41% from that March low. Even with the market increase, many investors still were not sure that we had seen the last of the decline. There were still people years later that had gone to cash and still hadn’t gotten back into equities. They missed out on a tremendous rise in the stock market and the commensurate increase in their portfolio.
5. Reducing risk should be part of your plan
Having an effective hedging strategy can help reduce the effects of volatility over the long-term. We believe it is important to protect against the downside without giving up too much upside. This has been and will continue to be a part of our investment strategy.
The worst thing that you can do now is panic. Financial decisions based on emotions have proven time and again to be detrimental to investors. Investing for the long-term will benefit those who are patient, disciplined, and have a plan. The best way to achieve the goals we've talked about together is to stay the course.
We remain vigilant in reviewing your portfolios and we are committed to your goals.
Edward J. Kohlhepp, Jr., CFP®, MBA
Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA
Founder & CEO
Source: Blue Bell Private Wealth Management
Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.