COVID-19 Conversations Over Cigarettes....

How are those New Year’s resolutions going? Oh it’s March….how could I ask that? Once again, the gyms are empty, the running trail in downtown Austin is less crowded, and the $800 Vitamix is packed in the back of a cabinet. Like so many things in life, we know what to do… yet we don't do it. The #1 cause of death in the United States is heart disease, yet heart-straining diets and habits thrive. Cigarettes are practically the equivalent of choosing cancer, yet I just overheard two people discussing COVID-19 fears during a smoke break. COME ON!! And, financially, straight-forward tasks like spending less than you make and investing in a suitable manner for your personal risk tolerance can go a long way. Yet, 25% of Americans have ZERO socked away for retirement, and 82% of Americans don’t have a plan. We know what to do – why aren’t we doing it!? Discipline is a key driver of success for many things, including financial well-being. However it's particularly hard to be disciplined during volatile times like right now...Q1 2020. So, consider the following points as you resolve to stay focused on your long-term financial goals:

• The first decision you must make in collaboration with your financial advisor is whether you are a speculator or investor. Benjamin Graham, the author of investing scripture, The Intelligent Investor, stated “An investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. The speculator, on the other hand, cares mainly about anticipating and profiting from market fluctuations.” We believe that speculation is not the best approach for long-term wealth accumulation as data consistently demonstrates that market timing is futile over time, even if you’re a pro. Furthermore...
• The opportunity cost of missing strong market days is incredibly high. We know it’s difficult, if not impossible, to time the market. You have to get it right twice, over and over again. It’s the same reason the blackjack table isn’t a good investment plan. Consider this: from 1990 to 2018, if you missed the five best days of the S&P 500® market return, your average annual compound return would be reduced from 9.29% to 7.75%... that’s per year for 28 years. If you started with $100,000 in 1990, that means you reduced your wealth from $1,202,962 to $808,507 by 2018. You may wonder how likely is this scenario...
• Turns out, more likely than you think. COVID-19 is the latest driver of volatility. Did you know that March 2nd, March 10th, and March 13th were the 29th, the 19th, and 3rd best days for the S&P 500® since January 1, 1962!!!? That’s remarkable… three times in eleven calendar days. The problem is, they came right after bad market days. It's easy for an undisciplined investor to react and miss out. Which brings me to my final point…
• Bear markets occur quite regularly, but they’re not the biggest risk to the success of your financial plan. The biggest risk is you. A bear market is simply a drop in stock prices of 20%+. Historically, from 1926-2019, in years the S&P 500® dropped 20%, the average return for the next year is +14.21%, and then average annual return for the next five years is +11.76%. While investment guarantees don't exist, discipline has been rewarded time and time again.

So, what are you going to do? Stay disciplined. Revisit your plan and make sure it remains appropriate for your personal headlines and your risk appetite. And, if you’re one of the 82% of Americans who doesn't have a plan, work with a financial advisor to develop one. There are so many things in life that cannot be controlled, but at 994 Group, we strive to hold ourselves and our clients accountable for the actions and behaviors we can. By staying disciplined, we can have a greater degree of confidence and peace of mind in the midst of the corona virus and whatever the next cause of volatility will be.

Sources: Financial Advisor Magazine Why Most Americans Lack a Written Financial Plan April 23, 2019, CNBC.com 25% of Americans Have No Retirement Savings May 24, 2019, Dimensional Fund Advisors US Equity Returns Following Sharp Downturns July 26-December 2019, Dimensional Fund Advisors Reacting Can Hurt Performance 1990-2018

This newsletter contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Index Disclosures:

S&P 500®: The S&P 500® index is an unmanaged index of 500 companies used as a representative sample of the United States economy. The S&P 500® index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.