Before we get to March 2020 which will go down in history, here is a flashback to when investing was “easy”... Everything was butterflies and rainbows in the longest bull (up) market in history. Diversification didn’t matter (2010-2019). 100% stock made the best returns, and holding cash and fixed income only made you envious of your risk taking friends.
Now to March 2020, how the tables have turned. Those individuals that were riding high on the backs of 100% stock now feel the pain of equity risk. These are YTD return numbers due to the global crisis we are currently in.
Astonishingly all it took was March of 2020 to affect long term performance numbers (5 year returns). Now the conservative individual is boasting to the risk taker about their returns.
KEY POINT.... from the world of basic math. If you lose 50 percent on a sum of money, you then need 100 percent gain to break even. Putting this in context, if your million dollars gets cut to 500k, you have a good chance of “bailing” before you ride the 100 percent bounce back.
Now, back to the light at the end of the tunnel. With March’s sell off, we have joined an illustrious group of bear markets that can claim they fell over 30%. Here are the following return patterns post 30% decline. You’ll notice some timeframes overlap... meaning things can always get worse (repeatedly) before they get better. However, with a long-term focus, correct investment allocation and time the market has typically rebounded.
All good data, but what’s the point?
Investing is not easy, if it was....everyone would be rich. For many reasons (which we will write about in future articles) the human animal is not “wired for success”. The average investor comes up woefully short in terms of their own investment returns.
Our philosophy at Retirement Capital Advisors has always been to “do no harm”. By nature, we have sided more to conservatism and balance when it comes to investing. This isn’t always an easy thing to do in periods where equity markets are moving higher, and portfolios aren’t as robust as the guy on TV says they should be.
Over time, a large determinant of success comes from one’s ability to handle the downs in a portfolio they can live with. Investing is not a spectator sport and a portfolio is an individual thing.
As always, please reach out if you need anything.
Disclaimer, all data cited herein is based on asset class and index returns and data/graphs calculated by others have been used as source materials. This presentation is for educational purposed only and is intended for use by Retirement Capital Advisors clients and contacts. No guarantees of investment returns are implied and investing entails risk including loss of principal.
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser.