It is easy to love the stock market when your account values go up month after month. Conversely, it is alarming to see the monthly declines in your values. Ouch! What should you do if you want to throw in the towel? Here are some things to consider…
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- Is your asset allocation in line with your tolerance for risk? Your investment objective and risk profile model lead to a recommended allocation of stocks, bonds and cash. Make sure your portfolio allocation matches your risk tolerance. It’s easy to get too risky in positive markets by loading up on equities – which can hurt you when the market declines.
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- Are the results as bad as you fear? We all forget that the S&P ended 2021 up 28%+. We ended 2022 with the S&P 500 down (-18%). Net/net that’s a 10%+ gain! And we’ve had a 10 yr. bull market, so your portfolio is much further ahead now than 10 yrs. ago!
- Note: No one can predict a market turnaround and the recovery is sneaky! As of 1/25/2023, ALL major market indices are in positive territory and most investments are posting positive returns YTD 2023.
- Are the results as bad as you fear? We all forget that the S&P ended 2021 up 28%+. We ended 2022 with the S&P 500 down (-18%). Net/net that’s a 10%+ gain! And we’ve had a 10 yr. bull market, so your portfolio is much further ahead now than 10 yrs. ago!
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- Look for the bright spots. Most client portfolios are not all significant underperformers. As we review portfolios, we see a lot of many investments that have outperformed their benchmark index. There were many individual stocks that posted positive gains last year – IBM was up 10.68%, Caterpillar was up 13.76% and Coca Cola was up 7.91%.
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- Do not forget the Index. As we meet with clients, we use the benchmark index as a comparison to their individual holdings. Many of our clients are invested in plain, vanilla index funds – and those posted negative returns in 2022 as the major benchmark indices were negative. That means you are not in ‘bad’ funds, we are in a ‘bad’ market.
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- Be patient. If you’ve been investing for any amount of time, you know the market goes in cycles. The recent bull market was 10 yrs. so we forget the markets do and will decline. We can all agree this current market is not fun, but it also will not last forever.