Earlier this week, we emailed our clients to discuss the recent stock market decline.  Figuring that others might appreciate our viewpoint, below is the entirety of that email.

Esteemed clients,

In August we authored a post about how you will (probably) feel when the market (eventually) crashes.  The piece discussed some of the emotions we inevitably experience during market crashes and tangible ways to prepare in advance.

While the recent market decline (S&P down ~18% from its peak in September) still doesn’t qualify as a “crash” by historical standards, we are guessing that those emotions are starting to creep in.  As the article discusses, it’s only human to feel that way.

The good news is that everyone reading this email already took the necessary steps to prepare: you developed and signed a thoughtful investment plan with allocations determined specifically to allow you to withstand crashes without them affecting your long-term financial well-being, and you engaged us to hold you accountable to that plan.  We are here to do so.

Crashes are a feature of the stock market, not a bug.  If markets did not occasionally crash, it would be easier to own stocks, more people would do it, prices would be driven up, and long-term expected returns would be lower.  The ability to stay the course through the downturns is what earns us the right to capture those higher long-term returns.  Crashes can be particularly valuable for those young enough to still be saving and investing, as most of the stocks we will own in our lives have yet to be purchased.

Market declines also provide investors the opportunity to “harvest” losses (i.e., selling any losing positions in taxable accounts to realize losses that can be used to offset gains and other income).  This too was written into your investment plan, and we are dutifully executing on that mandate on a daily basis.

Nobody can reliably predict whether this decline will continue, but even if it does, give yourself the gift of letting other people worry about it – you already planned for this.

Happy holidays,
Andrew, Patrick, and Tom