Some of the current topics making headline news are volatility, negative markets, inflation, and tariffs. Tariffs will end up being whatever they are and could be worse or possibly better for the American economy. In any case great companies will immediately begin working around them as they do with almost every challenge they face. That is why we own them and believe in them. Earnings and dividends ultimately drive stock prices, and both are increasingly strong at the moment. Our government’s new administration is going to do whatever it’s going to do just as other administrations have done before them. The entire House of Representatives and one third of the Senate is up for reelection in 19 months. If the current administration’s actions sufficiently mismanage the economy or the markets in the interim, we’ll get to limit its power by our votes.
Investing in the stock markets carries some risk like all investments do but maintaining long-term perspectives is a key for successful investors. Imagine driving a car down a neighborhood street at 25 mph while being able to see ahead for one or several blocks. The ride is relaxing and stress-free. If only being able to see 20 feet ahead of the car as you move along, the ride would admittedly be stressful and not relaxing. In the same token, investing without a solid plan can be like driving a car with only limited vision.
Short-term gyrations in stock prices have nothing to do with successful investors who have a solid plan in place. Here at RFS, we have built into our clients’ financial plans the expectation of a 15% correction annually and a decline of perhaps a third every five years or so. For the last ~ 100 years, riding out the temporary declines has been the key to earning about 10% annual compound returns with equities. We manage our clients’ investments with long-term views and provide six to 24 months of conservative holdings that are insulated from much of the volatility and available to satisfy the monthly income needs our clients depend upon. By doing so it is rarely necessary to sell wonderful well-managed companies to raise cash in down markets as most pullbacks and corrections recover within 24 months.
Having a solid financial plan helps investors maintain long range views, especially when driving conditions are hectic and changing. If you self-direct your own investments and it has been a while since you last reviewed your financial plan, now is a good time to do so. If you work with a valued advisor, it is also a good time to reach out and schedule a time with them to review your financial plan and update if needed to make sure it remains on track.
If you are looking for an independent advisor you can work with and trust, give us a call. We would welcome the conversation and chance to answer any questions you might have.