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Posted on October 3, 2019

The end of the world is coming, Unless it isn’t.

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Author: Patrick Walsh, Partner, Senior Advisor

 

  • “The stock market is even worse than you think it is”
  • “Dow to 30,000, expert”
  • “A death cross for the S&P 500 highlights a stock market in tatters”
  • “Stocks could drop 20% after an October disappointment, strategist warns”
  • “Reclusive Millionaire Warns: Get into the Market and Out of Cash Now”
  • “Another World Crisis? Why Interest Rates Cut Won’t Save U.S.”

Every single one of the items listed above is a legitimate headline I have read somewhere over the past year. Sadly, I could have made one up and shoved it in there and you probably wouldn’t have known the difference. I even mixed in two positive ones with the other negative ones, could you even tell?

The old saying “if it bleeds, it leads” has never been more prevalent than in today’s news cycle, especially in regard to the market and the economy. These headlines continue to bombard your tv, radio, computer screen, inbox, text messages, social news feed, etc. EVERYWHERE. Even worse, most of the market headlines are negative, even as I sit here and write this on September 18th with the S&P 500 up over 20% year to date. The pessimism is unbelievable, and clients often ask what news information you can trust. The answer is, really none of it.

The best advice I can give is to have a plan for your investments and stick to it, through good times and bad. With that in mind, I’d like to take this month’s blog to remind everyone of some core philosophies we believe in here at Oxford.

 

Proper portfolio construction, balancing stability and growth

We at Oxford neither forecast the economy nor attempt to time the markets. In a sentence that always bears repeating:  We are planners rather than prognosticators.  We believe that portfolios should be built in anticipation of volatility, rather than in reaction to it. Our “Stability Bucket” is a disciplined approach to taking the emotion out of investing.

  • For those with no cash needs over the next 5 years, you don’t have a true need for stability. Thus, your balance of stability vs. growth depends solely on your risk tolerance.
  • For those currently taking money from the portfolio, we determine your withdrawal needs for the next five years and immediately set those aside in the low-volatility Stability Bucket. In a bear market, the money in your Stability Bucket will help you ignore the temptation to sell growth investments at fire-sale prices.

 

Stocks for the long-term

For nearly 100 years, publicly-traded stocks have been the best vehicle for beating inflation and growing your wealth.  Large U.S. stocks have provided greater than 10% annual returns.  This holds true, despite average intra-year declines of 14%, and 30% declines once every 5 years or so. We steadfastly believe these long-term trends will continue.

Growth comes from owning the stocks of the world’s best-run companies.  We will always own these stocks; market timing is a fool’s errand.

Holding period returns for the S&P 500 since 1929:

  • One month: Positive returns 60% of the time
  • One year: Positive returns 75% of the time
  • Five year: Positive returns 90% of the time
  • Ten year: Positive returns 97% of the time
  • Fifteen year: Positive returns 100% of the time

That’s right, for any rolling 15-year period since 1929, if you had just held onto your investment the entire period, you would have made money 100% of the time!

 

The Five Words of Wisdom – It’s never different this time!

World War I, Great Depression, World War II, Korean War, Vietnam War, Oil Shocks, Black Monday, Cold War, Dot-Com Bubble, 2008-2009 Global Financial Crisis.

There is always SOMETHING out there, we just don’t know what it will be, how bad it will be, or how long it will last. Stay the course and remember the five words of wisdom.

In a bear market, people who think that this time is different, and that the market won’t bounce back, sell their stocks to people who understand that this time is never different. We stand steadfastly with the optimists.

For our clients, I hope this served as a great reminder of our philosophy and how to view the markets in light of all the noise out there. For those of you we don’t have the privilege of serving yet, I encourage you to visit www.oxfordfp.com to learn more about how Power of 5 Investing® may be a fit for your situation.

Happy Fall!

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