Guide to a Market Decline

January 24, 2022
min. read

The pundits of pessimism out in full force about the end of days and the latest "crisis du jour." Here's what to do during times like these...

Why is This Happening?

Is it the economy? Fed tightening? Rising interest rates? Rampant inflation? Recession? Geopolitical unrest? Bank concerns?

We've seen them all at one point or another in the course of our lives.

Each of these may lead you to question “Is it different this time?”

Our answer, like every time before, is...No, it’s not.

No one knows for sure why the market sells off, but it doesn’t matter.

In the short run, the market is a voting machine, moving about erratically based on peoples emotions. In the long run, it's a weighing machine based on company fundamentals and earnings.

What's important to understand is this short term, temporary decline is the “fee” for admission to the long-term returns, not a “fine” for doing something wrong.

The only way to obtain higher returns over the long run is to weather these declines in the short run. As blogger and author Ben Carlson says, it's a feature, not a bug.

What Now?

First, take a deep breath and try to relax.

We’ve been here before.

We talk about it incessantly in our newsletters and our meetings, but as Mike Tyson famously said, “Everyone has a plan until they get punched in the face.”

Well, the market is providing us with a heck of a punch. However, your portfolios are behaving exactly how they should during times like this and it’s critically important to remember they are designed for times like this.

So, what should you do from here?

If your life goals have not changed… do nothing.

You know the drill by now: shut off the TV, stop scanning the internet for catastrophic articles, and don’t incessantly check your account balance. Those are sure fire ways to lose out on being present in your life and make this temporary market decline even more painful.

Our job as investors during these times is not to try and avoid the pain, but endure it.

If you have excess cash… invest it.

As Warren Buffet famously said, “be greedy when others are fearful.” Don’t wait for the perfect time, get your excess cash invested now based on your life goals and timeframe. Your future self and your family will thank you.

If you are not sure… give us a call.

That’s what we are here for. We have been through a wide variety of market declines and a whole host of other market corrections and various panics.

We've weathered them all… and you will too.

We can revisit your portfolio and life goals to give you the confidence and conviction to ride this out and focus on your life, not the market.

The Silver Lining

No one can predict short term market movements. While it may get worse before it gets better, every day is another day we are closer to being on the other side.

We have two choices: try and stop it or accept the “fee” for the lifetime returns.

Capitulating may feel good during a decline, but it's always the wrong thing to do.

Panic is not an investment strategy.

If try and sit in cash to you wait for the good news on the market or economy before’ll certainly miss it.

If your life goals have not changed, stay the course, turn off the TV, shut off that computer...and live your life.