(This article was written for the Spring 2020 Newsletter. Article titled as same title of How Bad is it?)
As you are aware, we have been dealing with a bear market correction for several weeks now. The coronavirus has caused quite a scare. At first it seemed overreacted to and there wouldn’t be much of an economic impact, however, it eventually turned into actual economic impact, which we are still dealing with.
There has been a consistent barrage of negative news, especially when it comes to the markets. We mostly hear about the Dow Jones market index, and boy it has been quite a ride! In March we would be down over 2,000 points in one day, up again the next, and back down again. It was very volatile and dramatic. I started wishing for days where the market would only be negative a few hundred points instead of a few thousand. As of May 8th, 2020, we have had a Dow 52-week range of a high of 29,568.57 and a low of 18,213.65. That is a peak to trough drop of 38.40%! The S&P 500 dropped 35.41%. The NASDAQ dropped 32.57%. Yikes!
This has been understandably stressful to us and to our clients. It is not fun to see this kind of bear market. Here is some good news though: as of writing this article, the Dow is sitting at 24, 331.32. It has almost recovered half of the drop. Even better, the NASDAQ and S&P 500 are more than halfway back from their lows. We have definitely made some progress, but we are not quite back all the way.
As we have discussed in the Ryan Reports and one-on-one with many of you, our investment models are designed to fair better than the general indexes. By favoring certain sectors, such as healthcare, communications, and technology, we believe our conservative, moderate, and growth models are well positioned to accomplish this goal.
During this bear market, I have seen some people have the wrong perception of the nature of an investment portfolio. Some do not quite understand that an investment portfolio is not a nebulous value which mysteriously goes up and down. They also think the point is to get “lucky” by cashing out more than you started with. This is a way to view gambling or speculation, not investing!
I would like to remind you of the accurate, real-world nature of your investment portfolios. When you follow our advice of diversifying into quality, hand-picked investments, you own tangible assets which are chosen for their growth potential and/or ability to produce income over time. You are not holding some vague instrument which has an artificial value that may or may not go away. You own assets.
I believe you should be possessive with these assets. I want you to acquire as many of them as possible and hang on to them. It may not be wise to sell them when they drop in value. If anything, you may want to buy more! If you cannot buy more, then hang tight when the value is down. Be possessive!
It is during our working years we sacrifice to set money aside and buy investment assets. You worked hard for them. Do not give them away in a “fire sale.” I believe this simple concept and mindset are what separates wise investors from foolish investors. Those who are wise, make wise decisions. Even the wisest investors may be fearful or stressed at times. Checking those emotions and making good choices helps make the difference.
If you are stressed, just remember, it is not as bad as you might think.
This correction can still be short-lived. No matter how long it takes, be possessive and wise with your investments. If you are stressed, just remember, it is not as bad as you might think. Please do not hesitate to call if you would like an individual report on your accounts. We are always here to help!