If you’re paying attention to the financial markets, you’re probably feeling a bit unsettled by the volatility we have seen this year.
Volatility is a normal part of investing. It may feel scary, but it shouldn’t be surprising. Given the inherent volatility in the market, we have built this into our assumptions and our regular investment process. We also know that swings can happen at any time during the year, so we maintain cash reserves in our accounts for known cash needs over the next 12-18 months.
If more information would be comforting, please listen to our latest Market Commentary from our Chief Investment Officer, Miranda Carr, CFA
- Markets don’t like surprises.
- Volatility is a normal part of investing. It may feel scary, but it shouldn’t be surprising.
- Have a plan to ride out volatile periods.
- We maintain a cash reserve for known cash needs over the next 12-18 months.
- Bear markets happen about once every 10 years, and an intra-year downturn does not always lead to a negative calendar year.
- Our capital market assumptions are updated at least annually, and they reflect where we are in the market cycle. After periods of abnormally high market returns, we project lower returns in the forward period, which accounts for recessions and bear markets.
- These projections inform how much risk to take in our investment portfolios. They also inform how your portfolio should be invested between stocks and bonds, as well as how much you need to save to reach your goals.
- When markets experience extended drawdowns, our projections for the future actually go up. This is because over a full market cycle, the average annualized return is fairly stable over time. In fact, after a 20% market decline, the average 3-year cumulative return in the stock market since 1926 has been over 40%.
- We know that markets have rewarded discipline. The best course of action is to create an investment plan that fits your needs and risk tolerance – and stick to it. Staying disciplined through market dips and swings is one of the best ways to build wealth over time.
Want to talk about it? Contact us today.