Investment Advice for 2018: Ride out the Volatility, Even Through Temporary DeclinesSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on February 9th, 2018
by Robert Reby, CFP®
Reby Advisors constructs asset allocation strategies designed to outperform taxes and rising prices, generate the returns our clients deserve, and ultimately fund client goals. Our portfolios are designed to minimize fluctuation as much as possible, within each individual investors' risk profile.
Market Corrections and Portfolio Fluctuation Is Unavaoidable
Fluctuation, however, is unavoidable. In recent years, most of the investments in our portfolios have only fluctuated in the right direction. In the past week or so, we have witnessed fluctuation in the opposite direction.
RogersCasey, the global independent investment research firm, has helped us out enormously through stress testing our investment strategies and through new idea generation – while supporting our conservative philosophy of preserving wealth for clients. Even with our experience and their input, we accept that U.S. Equity markets historically correct temporarily by an average of 14% a year.
One out of every five or six years, the stock market has historically gone down, temporarily, by an average of about twice that. In every case, equity markets have then resumed the more permanent advance of gaining value.
Avoid Buy-Sell Decisions Based on Fear or Greed
The benefit riding out any temporary decline is the opportunity to achieve the long-term income and returns you deserve. The challenge for many investors, even those in a well-balanced investment strategy, is not intellectual or analytical, but most times, temperamental. Too many investors make emotional decisions based on fear and greed, causing them to buy high when markets are booming (greed) and sell low after a correction (fear).
In summary, even though we work hard to minimize fluctuation, riding out temporary declines, when fear is prevalent, is critical and essential to long-term investing success. Equity markets have always gone up over the long run, and those who make emotional buy-sell decisions often miss out on the rebound that typically follows a temporary decline.
To be clear, we're not predicting a prolonged correction. It's just inevitable and healthy when it does happen. We can't even say how deep or shallow the correction will be when it rears its head. We do feel confident that whatever occurs, it will be temporary.
Focused Investment Strategy for 2018
Rather than reacting to the ups and downs of the market, develop a long-term investment strategy aligned with your overall financial plan and lifestyle goals. Our investment philosophy is called Evidence Centered Investing. It's designed to capitalize on long-term market trends, identify undervalued assets, and ultimately profit from the investment mistakes of others.
Our financial planners work hard to gain the trust and confidence of our clients. Clear, concise, and honest communication is the foundation of that process. And it's particularly important when markets aren't doing well so that our clients fully understand why and how we're helping them.
If you have any questions about current market conditions or would like personal investment advice, contact Reby Advisors today: (203) 790-4949