Oct 07

Patience and Perspective

by Craig Buckhout

No one likes to see their savings decline in value. Times like these are not much fun for investors, watching markets “correct” in the face of abundant global uncertainties. As investment advisors, one of our most important jobs is to help long-term investors keep hold of their long-term perspective. Here are some things to consider.

A drop in stock prices makes us feel poorer – like we lost something – but it only really matters if we are buying or selling now, and if we are buying (or adding to our 401(k)) it’s a good thing!

Watching stock prices fall, and our nest eggs shrink, makes us feel like our financial security is out of our grasp, or at least out of our control. At times like these people say things like, “maybe I should buy real estate.” Land and buildings seem more tangible and sure to hold their value. Of course in 2008 we found out that real estate doesn’t necessarily hold its value, and when it must be sold, prices can swing wildly, just like stocks.

The stock market is very liquid so shares can always be sold at some price. When we try to sell our house in a bad market we say “there just aren’t any buyers right now,” which really means there is no one willing to pay a price I will accept. I could sell at a fire sale price, and maybe my neighbors would feel like they just lost some of their wealth, but until it becomes a blood bath like 2008, most of us would ignore it. We would say, “I’m not selling my house now anyway, so it doesn’t matter.” The difference with the stock market is that we cannot put our heads in the sand and ignore it. The 24-hour news channels are bombarding us with the news of falling stock prices and a tsunami of global uncertainties.

This will likely be a down year for our client portfolios. For clients withdrawing from their accounts, we can use income or sell bonds to provide cash and avoid selling stocks at reduced prices. For others we will be using new cash to buy stocks at reduced prices, and sell bonds to rebalance portfolios by buying stocks.

Three- and five-year trailing returns for stocks are still well above long-term averages. While we could have an extended period of weak returns, we expect markets to behave much as they have in the past, providing reasonable returns to those willing to take risk. We remain convinced that diversification and a steady exposure to stock market risk is still the best approach for long-term investors who are willing to keep a long-term perspective.

About the Author

Craig Buckhout is a Chartered Financial Analyst, and Principal at Rockbridge Investment Management.  “In the early 1990s it became clear to us that ordinary people were going to need help managing their substantial savings, as 401(k) plan assets began to replace pensions as a source of retirement income. After spending the first decade of my career in the world of corporate finance, I was excited to work with clients and apply institutional investment principles to help them achieve their goals.”  Craig holds his BS & MBA from Cornell University, and is a member of the SUNY ESF (College of Environmental Science and Forestry) Foundation Board – Treasurer, CNY Community Foundation – Board Member.
Learn more and/or Contact Craig


You Might Also Like

Other articles filed under Investing

Investment Committee Thoughts from Friday 4/27/18

May 8, 2018
Last week, we introduced you to our weekly Investment Committee meetings. When we met for class on 4/27/18, we began our discussion on the subject of an "optimal portfolio." The centerpiece of investment management is portfolio construction. Alongside financial planning,...
Continue Reading

Investment Committee Thoughts from Friday 4/20/18

May 4, 2018
Introduction People from all across the world look forward to Friday.  Friday marks the end of a (usually long) work week and the start of what is supposed to be a relaxing weekend.  At Rockbridge, we look forward to Friday’s,...
Continue Reading

Market Commentary – April 2018

April 23, 2018
Stock Markets Returns from various stock market indices over several periods ending March 31, 2018 are shown to the right. Here are a few highlights: While not observed in these graphs, volatility seems to have come back, which is normally...
Continue Reading

Tax Scams: What to Look For and How to Avoid Them

April 19, 2018
As another tax season comes to a close, we wanted to draw attention to a number of scams and schemes to defraud unsuspecting taxpayers. We think it is important that our clients be aware of how these scams work, and...
Continue Reading

The Value of a Financial Plan

April 17, 2018
It’s common for investors to feel nervous when looking at investments by themselves. Are you saving enough? Are you saving in the right place? Are you holding the right mix of investments? Should you own individual stocks or funds? Are...
Continue Reading

‹ Back to Blog Home

getting started is simple

315.671.0588 info@rockbridgeinvest.com Schedule a meeting Sign Up for Our Newsletter