Now that I have probably worn you completely out about taxes (one might say bored you), I think we need to talk about the market. Personally, I do not like talking about the market. Seems weird considering what I do, right? Well, it is because I am a financial planner and not a stockbroker. My focus is on the big picture and not making a bunch of trades. Regardless, with everything going on in the market I wanted to share a few thoughts. They are in no particular order here.
- My clients are in two camps. High income earners still accumulating assets and those in or nearing retirement.
- For those accumulating assets, having a market pullback is a good thing. We get to invest and buy things as they are on discount. I mean, wouldn’t you rather buy a good investment at a 10-20% discount? There’s a reason Warren Buffett has been going on a buying spree recently.
- On the other side, those nearing retirement would rather the market only go up. This makes sense as they are no longer adding to their investments and accumulating assets. This is why we focus on buckets. The riskiest investments are those clients won’t need to touch for years, giving their investments plenty of time to recover.
- One of my expressions is – “Investing is a matter of hope. Taxes are a matter of fact.” My point is this is why my clients and I spend so much time on taxes. There is more you can do with taxes than most people think. And doing the right things can dramatically improve your overall net worth picture. Hint – you should be considering some tax-loss harvesting now!
- Market timing just doesn’t work. I’ve known all these advisors over the years claiming they can read the technicals of the market and predict when things are going up or down. All I know is for the previous 20ish years, seven of the best days in the S&P500 came within two weeks of the ten worst days.
- Investing $10,000 into the S&P500 in 2002 would result in an investment of roughly $62,000 now. By trying to time things and assuming you missed the ten best days, your $10,000 would now be about $28,000.
- Fixating on what the Fed has done, may do, and didn’t do is a waste of energy in my mind. Focusing on things within your control seems to be a better use of your time. You know, continuing to invest, paying attention to your overall asset allocation, checking on your fees, and understanding your taxes.
- The S&P500 was in a bear market for a short time last week (I am writing this on May 23). Bear markets are normal. They happen every 3 ½ years on average. The average bear market sees a decline of 36% and last roughly 290 days.
- Bull markets last roughly 990 days and see average gains of 114%.
- Volatility is not a big surprise. This is partially due to technology. You have more information being shared faster. Also, lots of discount trading platforms and even products where you can buy companies like Tesla and Netflix for a few dollars (fractional shares). And with remote work and stimulus, you would be surprised how many “day traders” popped up the last few years.
- Speaking of day traders, where have all the crypto bros gone? They used to be all over my LinkedIn. Sadly, they are now being replaced by annuity salespeople, which is a whole other topic I need to cover.
- During times like this, it might be worth remembering the market is not doing this to you personally. This is normal.
Again, I just wanted to share a few market-related thoughts. Times like this is why I recommend every investor have their own Index Card of Investing. I created one years ago and keep it handy. It reminds me of what is important about my money. Things like focusing on fees, saving regularly, avoiding bad debt and more. If you haven’t created one, you may want to take a few minutes and scratch down some objectives. In the meantime, be sure to focus on what is important to you and within your control.
I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.