My oldest son is an animator with a deep appreciation for the nostalgia and wisdom of classic cartoons. His sense of humor, as well as his animation style, harken back to the days of Rocky and Bullwinkle and Mr. Peabody and Sherman. As often happens when I think of the intersection between his chosen career path and mine, I see not only the similarities but the irony, both of which occasionally help me make sense of the world of finance and investing.
If you’ve ever watched either of the cartoon series I’ve mentioned above, moments in this month’s blog are going to sound slightly familiar, starting with the title I’ve chosen. If you recall, very often, the creators of Rocky and Bullwinkle would give their upcoming episodes two equally ridiculous titles to help explain what may happen, and that is what I have done here. If you’ve been a client, a regular blog reader, or both, you can probably guess what I’ll spend a lot of my time talking about this month. That is the power of taking a long view when it comes to investing.
If the thousand-plus days of chaos that ensued after the market high on February 19, 2020, have not convinced you that there is no crystal ball, no way to time the market, and absolutely no way to know what’s coming next, then let me help to put it all together for you! You’ve probably heard me say this before, but it bears repeating - while we have seen a lot of what we have been through in the last thousand-plus days, we haven’t seen it all at once. Now, that doesn’t mean history doesn’t show us possible outcomes based on the cyclical repetition of market gains and losses and their relationship to things happening in the world at the time. But what it does mean is that we need to come to terms with the one absolute that we can trust.
And what is that you ask? Long-term investing.
What I intend to share with you this month are the principles of long-term investing and how they’ve prevailed in the time that has passed since the February 2020 market high. However, I want to summarize them for you before we get started. So, in true David Letterman style, let’s start the new year with a top 10 list! We will call this the Grover Top 10 Principles of Long-Term Investing OR The Keys to Investing Resilience. Here goes…
- Understand what market movement really means.
- Accept that volatility is both normal and healthy.
- You are your own worst enemy so avoid allowing your emotions to make investment decisions.
- Having a long view helps avoid short-term mistakes.
- Compounding is key.
- Diversification is critical.
- Your goals and investments should always be in alignment.
- Rebalancing is the foundational tool for staying on track.
- Understanding risk is paramount to investing resilience.
- There are benefits to having professional help.
Over the next several weeks, we will visit the “way back machine” a la Mr. Peabody as we get into more detail on each of these ten points in the hopes of reinforcing the importance of both long-term investing and having a well-developed financial plan. And yes, there will be more cartoon references!
Until next time…
One last thought, I believe an educated investor is an empowered investor. If you like what you’ve read and think your friends and family can benefit as well, please share.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly.
All investing involves risk, including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Dollar-cost averaging involves continuous investment in securities regardless of fluctuation in the price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.