Over the last 20 years, the average investor has made 3.4%. US Stocks have made more than double that, 7.2%. Many suggest emotions play a large role in this underperformance.
Sometimes it helps to have little reminders to keep us grounded in times of adversity like we face today.
In terms of investing during this crisis and avoiding our emotions, we have maintained two guiding thoughts. The first came to us from a public speaker, Dr. Kevin Elko who said you can “either live in vision or live in circumstance”. The second is positivity can lead to opportunity for the long term.
1. Vision or Circumstance: Our circumstances are unprecedented right now. They can range from serious health or employment concerns to being tired of your own cooking by now. It’s all too easy to get overwhelmed by changes in our circumstances.
Having a vision, is what you are doing about these circumstances - cutting through the noise and short term impact to take decisive action with long term benefits. During this bear market, we framed our reviews of each of our clients' portfolios with the following questions:
- Can we still execute on the long term plan we had in place before the circumstances changed?
- Can we implement elements of our vison for 'investing in crisis' that we established for difficult times like these?
- Do we need to create a new plan?
Planning prevents panicking.
2. Positivity Can Lead to Opportunity – Personally, I am analytical almost to a fault. In difficult personal or professional times, my defense mechanism is getting my hands on as much information as I can. The crossover between being analytical and positive in current financial terms comes from looking at the market from a long-term vantage point.
Let’s look back at some difficult circumstances in history and the resulting bear markets:
For some investors, the circumstances above were probably too much to bear (no pun intended). Maybe they didn’t have a vision, sold low, and never got back into the market. For the positive investor who stayed the course, look at how equities could have rewarded them:
Dr. Elko took the vision or circumstance conversation one step further in terms of being positive. Rather than these circumstances happening to me, how can they be happening for me? We translate this to how can we be opportunistic during these times within our overall plans.
Recognizing the appropriate vision and executing opportunistically - these are the conversations to have now if we haven’t already.
Send an email to email@example.com if you want to explore ways to be opportunistic in today’s circumstance. (You can also leave a voicemail at (301) 299-1763 – we will be monitoring the phones remotely as we practice social distancing).