Since the year 1950. Every crisis, every catastrophe, and every unknown. Every predicted crisis, catastrophe, and unknown. In every personal, financial, political and economic area of life – throughout our country and the world. All our then and future fears, worries, concerns and anxieties which plagued our minds. Again - all since 1950.
These were the daily stressors that we all went through trying to anticipate the unknowns and uncertainties. We were told to, “shift to this area or maneuver over here to capture future growth (or safety) before the soon-to-come prognostication happens.” Commentators (and the media) from every walk of life – the so-called experts – said it was all but certain to happen. A few did, but the vast majority - did not. But this was our lives experience – since 1950. Can you visualize it? Hold those thoughts for now.
Let’s look at the facts – yes, the reality of what actually came to fruition, as it relates to a diversified portfolio. A simple mixture of 60/40. Meaning sixty percent in equities (S&P 500 index) and forty percent in fixed income (US Bond Aggregate Index) by calendar year return. Remembering that this is what you were experiencing versus what actually happened from those unknowns that became known.
Here are the facts since 1950 - 2022:
Average is 9.34% Per Year
Positive Calendar Year Returns: 57 (which is 78% of the time)
Negative Calendar Year Returns: 14 (which is 19% of the time)
Break-Even Calendar Year Returns: 2 (which is 3% of the time)
Not to beat this drum again, but since were here - these figures are a culmination of all that either did or did not materialize in your ongoing concerns from the year 1950 to 2022.
What is my point to this little message? When comparing those prior thoughts, which turned into reality at the time, and now looking back on how they effected your actual outcomes (the returns) of a simple mixture of a 60/40 blend. Was all the fears, worries, anxieties and concerns worth it? Or could we have taken another approach?
Let’s compare this to the life of Mr. Rip Van Winkle. Who is Mr. Van Winkle, you may ask? Why he is the young Dutch American in the story published in June of 1819 by author Washington Irving. It is a story of a young farm owner who was not the most ambitious individual. However, he was quick to lend a hand to any neighbor who needed help or whatever would get him away from tending his daily chores on the farm. One day, as he was procrastinating (my interpretation), he followed a guy into the mountain who was carrying a keg; he began drinking a few and falls asleep - for twenty years. Upon waking, with hair and beard long and grey, he returns to the village to find nobody he recognizes and unaware of the changes that had taken place over time.
You may be thinking, nice story but how does this relate to the discussion above? Well, what would you have missed if you fell asleep since 1950 - from a piece of mind standpoint? Same financial results, but much less anxiety. From example of Rip Van Winkle; by doing nothing (only because he was sleeping and couldn’t allow his emotions to get the best of him) he may have awoken to find his investment portfolio at a much higher level than when he fell asleep. Same time frame, same scenario, same results – with less stress and less anxiety.
The lesson learned is that when you have long-term investments based on a written financial plan, shorter term events should sometimes be approached from a quote by Winnie-the-Pooh, “Never underestimate the value of doing nothing.”
Disclosures:
Important Information
Advisory services are offered through Melone Private Wealth, LLC (“Melone Private Wealth”). Advisory services are only offered to clients or prospective clients where Melone Private Wealth and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at https://www.meloneprivatewealth.com/.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Past performance is not indicative of future returns.
All investments include a risk of loss that clients should be prepared to bear. The principal risks of Melone Private Wealth strategies are disclosed in the publicly available Form ADV Part 2A.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. You cannot invest directly in an Index.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Although bonds generally present less short-term risk and volatility risk than stocks, bonds contain interest rate risks; the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk.
Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
Chart Source: JP Morgan Guide to the Markets March 23, 2023