June 2022

You Gotta Stick It Out

Why? Because you never know when stocks will bounce back.

I know it’s tough out there. Stocks and bonds are falling – very unusual. REITs are down. Crypto is way down. There are very few (if any) places to hide. Cash is king, but it’s hard to get excited about earning next to zero when inflation rages at over 8.0%.

Checking your accounts daily and reading your monthly statements can be difficult. It’s a good time to remember to think long-term and confirm that your mix of investments matches your time horizon. Are you comfortable with the amount of risk you’re taking? Perhaps a few portfolio adjustments and some tax-loss selling may be appropriate too. What’s not appropriate is a wholesale exit from stocks.

Good days (and bad days) in the market are unpredictable. Market timing is futile. Short-term market returns are random. Below is a chart illustrating how performance is pared back by missing just a few good days.

Missing just 25 of the best days in 45 years cut your annualized return by 3.4%! The risk of missing out on just a few good days is significant. Dalbar, a financial market research firm, examines ordinary investors’ returns. They find that over the past thirty years, investors in stock funds have lagged the S & P 500 benchmark by an average of 7.27% per year (11.06% for the S & P 500 vs. 3.79% for the investor in equity funds). The average investor often buys at the wrong time (when stocks are high) and sells at the wrong time (when stocks are down). The plight of the average investor darkens further when you account for taxes.

Markets probably won’t settle down until it looks like inflation is under control. I don’t know how long this is going to last. But given the extreme difficulty of trying to time the market (investment professionals are often wrong), a far better course is to stay invested. Remember, those market downturns are normal, and missing out on good days will dramatically undercut your performance.

I’ll contact each of you to confirm your investment mix. In the meantime, please let me know if you have any questions.

Enjoy the summer!

Henry 
HG Wealth Management LLC 
401 N Michigan Ave, Suite 1200
Chicago, IL  60611
312-723-5116