The following post is courtesy of Diane Harrison who is principal and owner of Panegyric Marketing, a strategic marketing communications firm founded in 2002 specializing in alternative assets.
It’s been a wild ride this first quarter of the year, with market swoops and dips and news coming at what sometimes seems like warp speed. Markets, as a proxy for investors, don’t welcome uncertainty and mood swings. They will often react to changing sentiment with sell offs and subsequent overcorrections on the back of each significant piece of news, creating even more concern for investors trying to digest what the updates mean.
Professional money managers tend to dive deep into the daily market moves, searching for data and signals that will help them position and prepare their funds for the weeks and months to come. But ask these managers if they want their investors to do the same, peppering them for multiple updates and rationales on what’s happening with their funds, and you will hear a chorus of nos. The manager is paid to worry over and steward the investments; the investor wants to feel that their assets are being managed appropriately, but shouldn’t expect to dissect each daily fluctuation in a search for reassurement.
With much of this year still ahead, perhaps a few reminders of classic investor ground rules can alleviate some of the emotional turmoil we feel about investing. If nothing else, these observations might reinforce to investors the need to stay involved, but focused on the priorities they have set out for their own plans, and to see past the daily noise of the current climate. Investment managers might take this opportunity to reinforce these rules to help their clients feel more comfortable with the short-term swings that aren’t necessarily a direction signal for their long-term path.
DAILY MARKET SWINGS DON’T MEAN MUCH. Like mood swings, a bad day or two doesn’t mean a full meltdown is on the horizon. Asking the right kinds of questions regarding why the market falls or rises on any given news helps keep the longer view of its direction in focus. As the markets bounce up and down by 10%, but doesn’t continue in either direction through the ceiling or floor of that volatility band, it’s more noise than an action call.
IF YOU DON’T NEED TO MOVE MONEY OUT OF INVESTMENTS, DON’T WATCH THE DAILY NEWS. The investment plans you’ve set are typically for a medium- to long-term horizon, and the monies allocated to markets are not monies you need for immediate expenditures. Remember that you should have liquidity funds as part of your holistic plan, and these funds are not impacted by the daily stock and bond market moves as they pertain to your personal spending plans or needs.
ALL MARKETS ARE NOT AFFECTED EQUALLY BY THE SAME NEWS. The main reason diversification is the foundation block of every financial plan is precisely to guard against all your assets moving in lockstep with each other. To have a solid long-term plan, there should be a healthy mix of investments that move independently of each other in general. While there may be days where it seems all your assets move up or down, if you’ve built a strong portfolio, you should see the protective measures of noncorrelation, varying time frames, and sector and strategy diversification work together to stabilize your overall plan.
MANY TIMES, DOING NOTHING IS BETTER THAN DOING ANYTHING. Never was this more clear than in the aftermath of 9/11, when the markets tumbled on global fears of terrorism and instability. Investors realized a paper crash in the value of assets, but unless you actually cashed in on the lows the markets hit in the fall of 2001, the markets were able to begin a slow recovery and ultimately far surpassed the levels just prior to 9/11. Those who feared they’d never be able to retire based on valuations in Q4 2011 would be very nicely situated in Q4 2024, assuming they LEFT THE ASSETS INVESTED. Investors need a friendly reminder of this basic ‘buy it and forget it’ mode from their advisors and money managers on a regular basis, but particularly in volatile market climates.
As 2025 continues to advance, and the news media bombards us with events domestic and global, economic and political, good and bad, try to see your personal investment plan forest through the trees, and keep calm but carry on.
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