New Year’s Resolutions
Wednesday, February 13, 2019
For many individuals, the New Year is often a time for people to reflect and make resolutions. For myself, I have never been one to participate in this process. It might be because I tend to be a creature of habit and changing one's thinking or behavior frankly is difficult. So here we are in mid-February, and for those of you who did make resolutions, I hope you have not given up and made some progress. When it comes to investing, I imagine some individuals wished they had sold their equities in September. Other investors may have vowed never to purchase a bitcoin or a cannabis stock again. The 4th quarter of 2018 reminded every investor who believes in equities that while the ups usually occur more often than the downs, the downs can undoubtedly show up without warning and cause damage not only to your portfolio but also to your confidence in how things are supposed to work.
I know I was certainly not happy with how the 4th quarter ended. I typically look at my 401k plan two times per year. Once at the end of June and once at the end of the year. I was happy at the end of June, especially when I looked back over the last five years. By the time December ended some investors will have a hard time erasing the 4th quarter from their minds. The year 2018 will go down as the first negative calendar year for the S & P 500 Index since the financial crisis in 2008. Dana funds, Feb 7, 2019
Think about that fact. If your only experience when it comes to investing had been the last nine years you might have thought investing is easy. Nine years of positive returns just set it and forget it.
However, in periods of rapid change, investing may seem impossible or at the least very frustrating. In the seven trading days before Christmas, the S & P 500 Index was down over 11%. In the eleven trading days after Christmas, the same index was up over 10%. Morningstar
The talking heads on television reported that December was the worst month for equities since the great depression. The same talking heads have now indicated that January was the best month for equities since 1970. As I write this note, the markets have just closed, and it is February 12th, 2019. The S & P 500 Index closed at 2774.73 and its year to date return is 10.42%. Yahoo Finance
I honestly am unable to tell you why the volatility showed up in the markets in the 4th quarter. Similarly, I am unable to tell you why the markets are up over 10% to start the year. I certainly have my opinions and could take some educated guesses, but there are plenty of "experts" on the financial channels and in the press spewing all the reasons for this and that. You can always come up with a reason not to invest. Think of all the global events that have taken place since 1926 and you will find many times when a person would think that he or she should bury their money in the back yard. However, all those events also created opportunities for investors. Think about the fact that Apple dropped over 40% in share price during the 4th quarter. If you did not own it, did you think about buying some? If you had owned for a long time, did you think about buying some more?
If your confused or questioning if you should even be investing are you working with an investment professional? Are you a year to two from retirement and wondering if the numbers will work for you? Maybe a resolution you should consider is to decide to get a second opinion from an investment professional. He or she may be able to bring some clarity to your current investment confusion.