Daily market movements and headlines can make investors feel like they need to take action. But short-term market events don’t have much bearing on a long-term financial plan, which is why investment decisions should stay focused on your longer-term goals.
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AJ, I hear clients and media personalities referencing the daily gyrations of the stock market as some sort of call to action, meaning the stock market did this, so you should do this other thing right now. How do we advise our clients to react to the day-to-day movements of the markets?
Yeah, it’s a good question, and particularly timely with the recent volatility that we’ve had in markets. Our advice is generally to ignore any of the day-to-day stuff. I don’t think there’s a lot of great information that comes from a one-day headline. And the reality is, when CNBC or Fox Business or Bloomberg has a headline that says stocks are down 2% on the afternoon and the world is melting, our clients don’t just own the S&P 500. They own the S&P 500 and then some.
They own the S&P 500X, whatever they don’t want to own. And so, we hear this from clients all the time. They’ll see this nasty headline that stocks are down 2% on the day or 5% on the week, and then they’ll look at their portfolio and they’re down 30 basis points or something. And the inverse can be true if they’re a younger client that’s a little bit more aggressive.
So, I think the most important thing here as an investor is just to recognize the day-to-day movements don’t have a whole lot of bearing and influence on your longer-term financial plan. And that’s what these portfolios that we manage are really built to accomplish our goals that are five years out, 10 years out, 35 years out, and so on.
So deemphasizing short-term market events and regularly reviewing a comprehensive and long-term financial plan should be the basis for our clients’ decision-making.
Absolutely.