Good Evening
I hope this mail finds you and your family well?
It’s a strange situation we are now all in and we have adapted to a ‘new normal’. We are also reminded of how important our family and friends are, be it spending most of our days with them or keeping in touch with them virtually.
The reality is that through this time many of us will encounter difficulty, be it a loved one getting ill, facing a business slowing down, a loss of earnings, and major disruption to our lives and jobs. That being said I believe we should focus on the positives from a financial perspective;
Personal liquidity. Will I have enough money to see me and my family through and will my business/job/career survive? What immediate actions do I need to take and take now? If you have availed of the mortgage moratorium, and like, me aren’t in a position to spend these temporary savings, I believe that this is a once in a lifetime opportunity to build up an emergency fund of c. 3 months net income.
Invested capital. If you are a client of Fortress your investments/pensions are invested in historically appropriate portfolios designed with these events in mind, so if you have no reason to sell for personal liquidity reasons, the action to take is to ‘do nothing’. As counterintuitive as it sounds it is for most the correct cause of action. If you are not, Reach out!
The wider economy. This usually reacts later than the stock market. It’s unclear as to where the economy, both local and global will end up at the end of this. But we must believe that humans will innovate & prevail.
Faith In Our Future
I personally have stopped listening to the news, but as we all know commentators with the loudest doomsday narratives catch the media’s attention (you know who they are!!!). We still don’t know where the market is heading. If these commentators claim to know the market is heading further down, I would politely suggest that every time they say it, their noses grow a little more!
Unfortunately, from what I am hearing from investment houses, many investors are continuing to make poor investment decisions based on the news. Successful investors continue to make investment decisions based on tried and tested principles and practices aligned to a long term financial plan.
Remember these corrections are temporary
Top - The S&P500 declined by 45% in a 6 month period after the collapse of Lehman Brothers.
Bottom - Over the following 11 plus years the S&P 500 rose 11.47% pa.
As clients of DLOC know, the evidence suggests that there is a 2.5% premium per annum for investors who manage to behave themselves and stay invested through volatile markets.* In practice this meant a client with €100,000 invested over 20 years, had an additional €130,000 in the final value their portfolio.
A reminder of the successful investing traits:
Have a diversified equity and bond portfolio which is the funding vehicle for you and your family’s financial plan, which takes into account your most important life goals.
Do nothing through all markets cycles. Cycles are driven by fear and greed. Do not compound the issues we are all facing by committing an investment mistake, we have enough to contend with through the lifestyle disruption we are all experiencing.
With the extra free time at home please don’t stress too much about your portfolio, but please reach out if you are concerned. If you can get through this market period without committing the gravest of investing mistakes, which is selling in a declining market, it is highly unlikely that you will encounter such extreme conditions again. I obviously can’t guarantee this, but it’s a feeling.
Looking at the prices of the stock market day by day will fill you with anxiety. The less you look the better you’ll do, but more importantly the better you’ll feel. If you’re looking at your portfolio daily, you’re not a long term investor, you’re a short term trader.
As a valued client, I urge you to remain relentlessly committed to your financial plan and in turn the investment portfolio that helps you too fund it.
If you are not a client (yet) we would be very happy to have no obligation chat and offer a second opinion on what you currently have or are doing.
Either way, please have ‘faith in the future’ by committing to staying invested, not changing your portfolio at the first sign of the storm and not getting knocked off-course by the mainstream media, whose main job is to report negative news or indeed your local bank or salesman who will sell you promises of guarantees and security.
All these guarantees and promises, I would argue, come at a very significant cost you and your family’s long term plan.
“The stock market is a device for transferring money from the impatient to the patient.” Warren Buffett
To clarify, we cannot know which way the market’s next 25% move will go. But we know with crystal clarity which way its next 100% move will be, and it is my job to encourage you not to risk missing it.
Two Top Reads
"Taking care of your macro environment" (5mins) by Paul Gleeson - Click on Pauls bio - I wouldn't be able to do his life experience justice & would make this an even longer read than it already is. But this article was helpful for me in framing the new reality many of us now find ourselves in.
Red Notice (5 hours) by Bill Browder - great read on Russia and Putin.
I wish you and your family well, stay mentally and physically strong. This too shall pass.
Kindest Regards
Rob
As always if you wish to discuss anything, please call me. All my meetings are now being held remotely through Zoom and my Online Diary is available here.