The Price of Admission

Everything is down this year except cash and municipal bonds. Headlines are dismal.  Volatility is rampant.  This isn’t some freak event.  It’s the price of admission.

Taken as a whole, yes it is unusual to have almost every asset class down in a calendar year.  What’s not unusual is the negative movements themselves.  Stocks go down.  Bonds go down.  Commodities go down.  Real estate goes down.  They will also go back up.  

While the S&P 500 only got a bear kiss (down 19%, not a full 20% bear), we’ll eventually see another full-on bear market.  The longer we go without one, though, the more hysterical the news will be.  Each year that passes without a bear market is a year that experienced, seasoned folks retire and bright-eyed neophytes file in.  We’ve had ten years of this.  If your financial advisor is younger than 32, they haven’t navigated a bear market.  Most people with 10 years of experience in their jobs have seen the good and the bad.  Not investing!  

If your financial plan only extends out to tomorrow, or next month, or even next year you will fail.  This is the key to the age-old riddle of running away from a bear (or a bear market in this case).  You don’t have to be faster than the bear.  You just have to be able to outrun the slowest member of your group.  Likewise, you don’t need to daytrade your way out of a bear market.  If you do, you’re the slowpoke.  Having the discipline to run for 20 years puts you at an advantage to someone who can only focus on what the market did yesterday.  This doesn’t mean you have to be 100% stocks forever.  Having an appropriate cash cushion allows the remainder of your portfolio to not worry about the short term.