The stock market crash of 2008-2009 is a very recent memory for many investors who still bear the scars from the experience. At Rockbridge, we also have prospective clients who walk into our offices saying that they haven’t recovered yet from the financial pain their portfolio endured over those several months.
Why? It’s usually a combination of some or all of the following factors:
“More money has been lost trying to anticipate and protect from corrections than actually in them.”
– Peter Lynch, renowned Fidelity fund manager –
The last 10 years haven’t given investors the risk-appropriate returns they deserved (a 50% stock and 70% stock portfolio basically had the same 10-year result), but if you stayed the course, you’re certainly not “still recovering” from 2008-2009.
For example, a $100,000 investment (50% stocks and 50% bonds) at the market peak at the end of 2007 returned to $100,000 only 13 months after the market bottom, as shown by the graph below. This is not something we want to experience again, but certainly a result most investors could live with given the circumstances.
Now, how do you accomplish that result?
“The investor’s chief problem and even his worst enemy is likely to be himself.”
– Benjamin Graham, “The Father of Value Investing” –
We can’t predict or control what the crowd will do in the financial markets we are seeing today, but we can increase our odds of a successful outcome by controlling the aspects of investing that can be controlled: diversification, asset allocation, costs and discipline.
We might see a period of negative stock market returns in 2017, but we don’t know. All we do know is that the best way to guarantee underperforming the market is to not be invested in the market, so our answer is to stay the course and periodically review your portfolio with us to be sure the level of risk you are taking is appropriate for your specific goals.
Other articles filed under Investing
May 24, 2017
Young or old, wealthy or poor, online or in person … Nobody is immune from financial scams and identity theft slams. No matter who you are or how well-informed you may be, the bad guys are out there, daily devising...
April 24, 2017
Stock Markets The accompanying chart illustrates the diversification story. It shows returns in several markets over both the March and December quarters. The upward sloping blue columns of the December 2016 quarter show an increase from the low (4% loss)...
April 21, 2017
On March 15, 2017, the Federal Reserve increased interest rates for just the third time since the financial crisis in 2008-2009. Investment theory tells us when interest rates rise, bond prices fall, so rising interest rates are bad for bond...
April 17, 2017
The stock market crash of 2008-2009 is a very recent memory for many investors who still bear the scars from the experience. At Rockbridge, we also have prospective clients who walk into our offices saying that they haven’t recovered yet...
March 23, 2017
Teachers Insurance and Annuity Association, better known as TIAA was founded almost 100 years ago (1918). TIAA provides retirement plan solutions for a majority of the higher education institutions in the United States. One type of investment, called the TIAA...