Everyone has heard the saying “good things come to those who wait” or maybe you’ve heard of the marshmallow test given to children. Likewise, delayed gratification is a major part of investing. Chasing an asset class that just had a winning period or selling one that experienced a losing streak can wreak havoc on a portfolio.
The current volatility in the stock markets reminds me the value of having a game plan and sticking to it. No asset will go up forever; almost everything is cyclical. If you are patient and stick it out, however, odds are the outcome will be positive. If you go back 10 years ago, the unpredictable asset class was housing and, eventually, the entire stock market. About 20 years ago it was the technology sector. At those points in time, if you got out at the bottom and didn’t get back in in a timely fashion, you may still be feeling the effects.
Timing the market is very difficult for two reasons:
- You must make a precise decision when to get out and,
- You must make a precise decision when to get back in.
Given trade conversations and rising interest rates, we will likely see more volatility in the stock markets than many are used to. However, having a plan and diversifying your investments are great places to start to help you feel more comfortable or prepared. Investing in a broad array of stocks, bonds, and money market instruments (yields now above 2%) can do a lot to spread your risk.
One last note, thank you for your patience. This past year we converted a key piece of software, remodeled our office, and changed to a new recordkeeper for our 401(k) plans! We realize there are some short-term hiccups, but in the long-run these updates will be positive for those we serve. Thank you!