As the market continued to swing wildly — mostly downward — at levels not seen since the financial crisis, we sent updated thoughts to clients on March 12th.  Below is the entirety of that email.

To our clients,

With the headlines genuinely frightening and global markets in freefall, we wanted to reach out again, even if the message is largely the same as it was two weeks ago (see below).

Unless there is money in your portfolio that is needed for an important short-term expense – and if we created the right comprehensive plan upfront, there should not be – then the right approach is to stay the course.  It always is. Even when today’s situation feels different than anything we have ever experienced. It always does. As they say, the four most dangerous words in investing are “this time is different.”

And what is the alternative?  To move some money from stocks to bonds or “go to cash” until things settle down?  While those actions might feel comforting, the challenge is that there will be no clear indicator that the worst is over.  By the time the headlines start to sound positive, the market will have already rebounded strongly, likely to higher than its current level.  

By way of example, during the Financial Crisis beginning in 2007 the stock market felt a lot like this on many days (and eventually fell much farther from the top than we have experienced during this drop).  On March 9th, 2009, the headlines were still ugly, investor sentiment reached its lowest level in recorded history, and those who had “went to cash” had no plans to “get back in.” However, without fanfare, stocks started going up again that day.  Headlines were not improving, and it by no means appeared that the dust had settled, yet by June 1st the stock market had climbed 41% from its March low and continued to rise from there. Had you gone to cash and stayed there until the news settled down, you would’ve missed out on massive, often sudden gains.  Those who stayed the course were rewarded – especially those who continued to rebalance (increasing relative exposure to stocks) as the market tumbled.

Feeling fearful about your portfolio during times like these is normal, and even healthy (it comes from the same part of our brains that allowed early humans to evade predators and survive as a species), but acting on that fear is not.  Investing in stocks is certainly hard, but we can assure you that this time is not different – patience and discipline will again be rewarded.  

Please let us know if it’s helpful to discuss this live at any point – we’re here (we operate as a remote firm anyway, so aside from the market turbulence, it’s business as usual for us and our team).  

Best,
Andrew, Tom, and Patrick