By the time you’re reading this, the market volatility that burst onto the scene and into the headlines in early February may already feel like ancient news. Or not.
As Wall Street Journal columnist Jason Zweig said in his February 5th column, “The Stock Market Didn’t Get Tested – You Did.” To make good use of the stress test, we decided to respond to the events while they were still fresh. Here, we share our thoughts to this common question of the day:
“When someone asks what has happened in the market today (February 5th), what would a HIG employee say?”
Rick Hill – This is a particularly good time to ignore breaking news. Market declines are expected. Historically we’ve seen declines as steep as 25–30% about every five years. Whatever happens next, the best strategy for investors who have a planned asset allocation is to stay with it. That gives you the best odds of achieving your financial goals.
Buddy Reisinger – Hey, did you watch the Super Bowl? (I hope so.) Did you watch it on a huge, flat screen? (Of course.) No wonder Best Buy and all the other electronics stores were offering huge sales on the latest TVs and home theaters right before game day. Well, guess what? The market is on sale right now and, like most sales, it’s probably temporary. If your investment plan calls for it, now is the perfect time to buy while stocks are on sale. And if you’re already all set, remember the Long View is looking up.
Nell Schiffer – Look at it this way: Stocks are on sale. Remember, your best chance to make more money (if that’s your goal) is by being on the patient side of the trades when everyone else gets scared. The secret formula to achieve that: Save habitually, invest globally, tilt toward small, cheap companies … and stay put. Repeat until rich.
Matt Hall – When thinking about investing, I try not to think in days. We are interested in decades and longer. “C’mon Matt, really?” Yep, the smart money is patient and disciplined; we teach and have been rewarded for both. The great Warren Buffett said, “Our favorite holding period is forever.” I’m with him. It reminds me of our firm’s motto: Take the Long View.®
Henry Bragg – I am reminded of a river-rafting metaphor. When rafting down the river, your guide is shouting commands: “LEFT side! RIGHT side! Now DUCK and hold on.” This is the time to duck and hold on. The waters are calmer ahead, and we knew this rapid was coming (even if we weren’t sure exactly when or where). That’s how rivers are.
Katie Ackerman – It’s true, the market can be a crazy thing. But we encourage our clients to stick to the plan we’ve created together. Knee-jerk reactions often lose money. All of that noise you see and hear in the popular press … It sells more magazines than our “boring” plan to help you become and stay rich.”
Dyanna Jones – If my brother asked me this question, I’d tell him we recommend he take a “long view” approach, because it allows us to focus more on his individual needs rather than the media hype. If your investments are well-diversified and you believe that Risk = Expected Return, staying diversified will help keep you anchored during a market shift.
Jared Machen – I’m not surprised by what has happened in the market. While markets are efficient, they overreact to the most recent economic or market data. The media often uses short-term market movements to paint new realities about the financial world, rather than viewing these movements in the context of what the greater evidence teaches us: Market prices fluctuate unpredictably over the short-term, so ignore the noise and focus on sticking to an investment strategy that best positions you for long-term success.
John Reagan – Honestly? I didn’t even know the market went down until you asked the question. I was busy taking care of our clients’ long-term needs, helping them focus on things we and they can control. After-hours, I prefer to run after my two young boys instead of the stock market.
So there you have it. Whether market volatility lays low again for a while or it’s recurring as you read this, we hope you’ll find our “live-action” answers worthwhile whenever you may be wondering (or worrying) about what the market might do next.
And by the way, despite the common themes you see throughout our responses … No, we did not cheat and look at each other’s answers on this test!