Let’s be honest. We’re in a weird place. COVID-19 seems to be getting better, but we are not out of the woods yet. With your investments, we are in a similar spot. The S&P 500 dropped from 3386 to 2237 (34% loss) from mid February until late March. In less than 60 days, the S&P has bounced back to 2840 which puts the S&P down just about 13% from January 1 values. WOW – what a ride it’s been. Some investors are now questioning where the market is headed: up or down again?

For investors who fear another downward journey, it’s appealing to think about moving some money out of stocks and into safer investments (bonds or cash). There are two points I want you to know:

  1. Long term investors have historically been rewarded by taking systematic diversified risk. Take a look at the growth of dollar invested in the MSCI World Index from 1970-2019. That’s a 69x multiplier of your wealth over the last 49 years.
  2. Studies have shown (time and time again) that investors who attempt to time to market and move assets around tend to lag the returns of a stable long term investor. See the investor behavior penalty below:

With these two points in mind, we believe the best course of action is to stay fully invested (even during times of uncertainty). Taking measured, long term, and systematic risk give you the best odds of reaching your financial goals.


Investor Behavior Penalty

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