12 March 2020

Stay the Course of Your Financial Plan

For many of us, the feeling of uncertainty can be an uncomfortable one. Watching the market continue to dip day after day without knowing when or how a rebound will come can make some investors want to push the emergency eject button all together.

But before you consider making any changes in your financial plan, consider the life of the investment over the long term.

One of the most successful investors of all time, Peter Lynch, says the secret sauce to investing is to stay the course.

“More people have lost money waiting for corrections and anticipating corrections than in the actual corrections,” Lynch says.

While we may be seeing the longest bull run in history coming to a close due to the fears of coronavirus, ultimately doing nothing with your investments will provide the best level of certainty one can offer.

Think about these numbers: Since 1950, the S&P 500 index has returned 7.8%. If an investor missed the top 10 days in the stock market, their gain drops to 6.7%; miss the top 20 days, the gain goes down to 5.9%; miss the top 30 days, it drops to 5.3%; and 40 days, the gain is down to 4.6%.

It’s tempting to cash out in turbulent times and then get back in the game when the storm has passed but trying to forecast the market and play the waiting game could have a greater unfavorable effect. It could mean missing out on the biggest upticks of the market. And that would be harder to recover from than the dip in the market. As history shows, markets fall—that’s what they do over the economic cycle.

Approach this lull as an anticipated hurdle in a long-term disciplined investment strategy and try to drown out the short-term noise. Your portfolio’s performance depends on it.

 

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About Stu: With more than 30 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.  

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