Well, here we go again. After nearly a decade of rising markets, with only a few bumps along the way, it seems we are back to more normal market fluctuations. It probably feels worse for many people because we have become used to more positive days, weeks and months.
One of the guarantees in investing is that volatile markets will persist. Our job as investors is to ensure we do not act irrationally. Volatility is actually a friend to us as investors. For example, if you were to see that your favourite food at the grocery store was on sale at a 25% discount this week, wouldn’t you head to the supermarket to stock up? Our portfolio managers view their favourite businesses in a similar way. Since they know intimately the real value of the businesses they want to buy, they are thrilled when they have the opportunity to buy them at reduced prices. Like your favourite food (which is likely a favourite with lots of other people) you know that the price is going to go back up again.
Unlike the weekly specials at your supermarket however, it may take longer for the stock price of companies to go back up. That’s where the first and most important attribute of a successful investor comes in – Patience. Stock market downturns can last a month or two, or occasionally as long as twelve to eighteen months, so patience really is important. Always keep in mind that the periods of growth are far longer and more frequent than the declines. Don’t let that feeling that the ‘herd’ who are heading for the exists are smarter than you and your portfolio managers. They aren’t. They are acting on their emotions rather than good strong sensible research. Your managers are doing the real research and due diligence needed to ensure you and they are successful.
Lastly, relax knowing that you do have your money invested in a diversified portfolio. That means that you likely don’t own just stocks. You will have a variety of bonds and cash in your holdings, which will limit your downside, because when markets are uncertain that same herd selling their stocks floods into the bond and cash segment making them a safe haven.
We are here to guide you through times of uncertainty and ensure that keep to your plan, so call us if you’d like more details on how your portfolio managers are currently positioning their portfolios.