Market Volatility and the Investment Highway
Well that was fun, wasn’t it? And by “that”, I mean the stock market rise that transpired over the time from Election Day 2016 to the end of January 2018. It seemed like our investment accounts hit new highs just about every other week! Then came February of 2018, and a dose of reality with it. Markets don’t always go up forever, and market volatility sometimes causes folks to become impatient and swerve off course. Which reminds me…
I travel the Florida/Sunshine State/Spessard Holland/Ronald Reagan/Whatever-It’s-Called-These-Days Turnpike, southward to Miami, quite often. My route takes me eastbound across State Road 60, which stretches across Florida from Vero Beach to Clearwater. There is a 27-ish mile stretch of that road east of Lake Wales to Yeehaw Junction that is mostly a two-lane road.
- Most people — maybe 70 to 80 percent — drive sanely and safely along this road, which is abutted by sod farms, melon patches and cow pastures.
- There’s another 10 to 20 percent that are dangerous out there. Distracted by cell phones and radios, or simply driving too fast and on the edge of being out of control.
- Then there is the 1 to 5 percent, the special ones, that are just bat-guano crazy. They pass in the face of oncoming traffic, dodge in and out of traffic, cut people off and whiz by at 100 mph. They pass on curves, on double yellow lines or in the fog or rain – just nuts.
As a result, every so often, the highway patrol must shut down the road. Sometimes an ambulance comes, sometimes a helicopter life flight. Sometimes the first responders — sadly – can only clean up the mess, damage already done.
Through completely non-scientific means, my colleague and I have determined that if one drives at the maximum rate of speed with zero caution along this stretch of road, one may arrive at the four-lane section of highway just east of Yeehaw Junction only 4 to five minutes earlier than they would have if they had driven sensibly.
Impatience: not well suited to driving or investing
Americans are not a patient lot, are we? Granted, impatience is an important part of the drive to succeed and innovate, but it does not serve us well when driving… unless we happen to be entered in the Daytona 500. What does this have to do with money?
Impatience also does not serve us well in the world of investing.
So, what should I do with my investments when the market is volatile?
I once heard Nick Murray (advisor to financial advisors) paraphrase Winston Churchill:
“Buy and Hold is the worst form of investing known to man…except for all the others.” – Nick Murray paraphrasing Winston Churchill quoting an unknown source
I suggest when the market volatility rises — or bounces up and down like Little Bunny Foo-foo — ask yourself if you currently on your lifetime investment plan. If, that is, your investments are following the path that will take you to your goal over time. Too often, investors make knee-jerk changes or adjustments to their portfolios that affect them negatively in the long run.
If the answer is yes, then remind yourself to stay the course and drive smoothly along the investment highway. If the recent market changes have you thinking about your portfolio and whether it’s right for your life’s “road trip,” talk to a financial advisor to determine if any changes to your investment plan are sensible. All the while keeping your eyes on the destination and your wheels on the pavement.