Have you ever been to the doctor and stated what WebMd said? I did that once. I told my doctor that my Apple Watch had woken me up to tell me my heart rate was low. He asked, well what did Doctor Apple tell you to do? I got his point. Doctor Apple doesn’t know me or my health. Doctor Apple was reacting to one number.
Last week we sent our friends a letter that explained the Rules of the Financial Classroom. If you didn’t see the letter and would like to, let us know. Today the financial “experts” on television screamed scary headlines. All were variations of The Sky is Falling.
As our letter explained, history has shown that staying the course and not reacting has been the right lesson plan for most long-term investors. Today’s headline said one number might mean we will have a recession. The media didn’t say that the number might not mean a recession. My low heart rate might have meant a health problem. That number didn’t signify a health problem, but actually a health strength. Successful financial students don’t time the market. Successful investors don’t react but instead, act on a plan. Thank goodness I followed my health plan created with my doctor based on my history, my lifestyle, and a lot of numbers.
Have you ever noticed the media rarely says the state of the world is good? Today more people are middle-class citizens than ever in all of history. ALL. Middle-class citizens buy most goods and services in the world. The media doesn’t remind us we live in amazing times.
Today the media or financial experts didn’t tell us that the yield on the S&P 500 is 2%. The short-term rate that caused that inverted yield curve is 2%. The “media experts” didn’t mention that an asset that has a yield and that grows over time may be better suited to an investor seeking growing income in a long-term retirement. The “media experts” told you the market will go down and that we will have a bear market because of that one number. The “media experts” didn’t tell you there are short term inverted yield curves that go away as quickly as they come, that it is the sustained inverted yield curves that are worrisome. The “media experts” didn’t remind you that a recession doesn’t always equal a bear market. The “media experts” also didn’t remind you that ups and downs, and even bear markets are all part of normal market behavior. And the “media experts” didn’t point out that what you own or invest in should be determined by your plan.
The media, like Chicken Little with a sponsorship vest, tells you “The Sky is Falling, The Sky is Falling….” React. Tune In. React. Tune In. React. Tune In. Like a nonstop fire alarm in elementary school without reassuring teachers telling you this is a drill. This is normal.
The media colors every financial broadcast with the fear of 2008 to 2009. The Bear Market of '08-09' was the scariest one modern investors have experienced. This decline was deep. The decline was long. Clients, almost daily, express their fear of the time to recover, even though many of them recovered from that bear market like every other one in their long investing lifetimes. (We think this may be because life is getting noisier and noisier.) None of us knows when that final bell saying school is out is going to ring. We could be looking at 40 days or 40 years of class time. But we do know history. And a complete study of history is very reassuring.
At the high in 2007, the Dow was 14,000. At the low on March 9, 2009 it finished at 6500. Today it is 25,450. Almost double where it was in 2007. And if your plan provided for your needs in the last 12 years, why can’t you go thru the ups and DOWNS again? Because the Rules of the Financial Classroom say it will go up and down all the rest of your life. The rules say timing will not work. Ever. Or another way to state that rule is Timing Never Works.
As financial planners, we are paid to create your financial plan, including an investment plan, and to monitor and adjust when your life changes! Not when the “media experts” get noisy. We are paid based on the value of your investment portfolio, knowing your portfolio will go up and down. (Our compensation declines when your portfolio drops but we wouldn’t be earning our keep if we told you to waiver from your plan just because of a dip in the market. Our calling as your financial educators and planners is to keep you focused on your plan and reaching for your goals and dreams.)
P.S. I don’t listen to Dr. Apple anymore. I do use my watch to listen to music. I don’t suggest you quit watching television, but I would say watching reruns of Andy Griffith, Leave it to Beaver or Boy Meets World may give you more useful information. Miss Crump, Mrs. Landers, and Mr. Feeney were very good teachers.
