I greatly appreciate your patience with your investment portfolio during these stressful times. As I have been explaining, the most effective way to grow your wealth is to not let short-term emotions override your long-term planning.
Buying or selling stocks when the stock market is volatile, as it is now, is a recipe for disaster. During the last several weeks, the markets have produced the single worst day and single best day that they have had in the last decade! It is the emotional investor that buys and sells during these times. In periods of high stress, our emotional brain takes over from our rational brain. The typical resulting investment decisions are to either sell all of your stock investments, so as to stop the decline in values, or buy additional stock investments to take advantage of the depressed prices.
At times of heightened stress, we are also more likely to turn to friends and “experts” who all seem to be taking actions that they believe will improve their investing results. Listening to those voices that reinforce your emotional decision making can make the problem worse. The best process to get wealthy over time is to ignore all of that noise. The investment policy that you created during calm times is our roadmap for investing for your family. We don’t vary from it because the markets have gotten more volatile. In fact, its purpose is to ensure that we don’t.
To help calm feelings that this market decline will be one from which we will never recover, I have attached a chart that was shared with me by the investment firm Cohen & Steers. The chart suggests a high likelihood that we will recover, and it may come more quickly than you might expect. The chart reflects the recoveries made in the stock market and real estate market in the six months following the last six major stock market declines. It also shows that U.S. Treasury bonds and other taxable bonds were stable during the recoveries. As you know, while the stock markets have been declining, your bond investments have been stable to increasing in value. While we cannot guarantee that our next recovery will happen as quickly or as fully as the last six, the chart should provide you with some optimism about the future of your investments.
I appreciate the trust you have placed in Oak Wealth Advisors and would be happy to have a call with you to discuss your investments or any of your planning in greater detail if you would like to do so.
Many thanks,
Mike
