YOUR QUARTERLY VIDEO REVIEW
Hear our thoughts on the previous quarter & your financial life.
Our 2021 Q2 Quarterly Client Update video, sent to our clients to accompany quarterly statements. Please contact your Triune Financial Planner with questions!
Quarterly Video - Q2 2021
Investor Humility is Key
Good afternoon Triune clients and friends!
Do you remember about a year ago when we were disinfecting items that we brought home from the grocery store?! Now mask mandates are lifted in most areas, and we are getting back to our pre-COVID routines. It has been quite a year in our lives – one that we will tell future generations about. And it was a memorable year for investors as well.
The S&P 500 hit its COVID induced low of 2,239 on March 23, 2020 (having dropped over 30% in 33 days) and now, less than 16 months later, it has nearly doubled and sits in all-time high territory above 4,300 as of July 9th. That is a cumulative return since March 2020 of over 90%!
When stocks go bullish in a big way, especially after a big decline, human instincts that lurk in the back of our mind come roaring to the front, and it sounds something like:
“This has to end soon”
“A significant pull-back is coming”
“I’ll get out now and back in when the correction is over”
These instincts are normal so go ahead and acknowledge them, let them have their moment. But our encouragement to you is to not give into this instinct and here is why: Basic human nature leads to the opposite actions necessary for lasting investment success. Other basic human instincts are to sell out of stocks in falling markets (when we should be buying) – OR to buy the hottest performing investment fund or asset class in a prior period of time (buying high instead of buying low).
It’s times like these when we need to take a step back and review some the important concepts for achieving long-term investment success.
Investor Humility: The moment you decide the market is due for a correction and you will avoid it by pulling out, you are effectively claiming to have superior insight to all the global owners of stocks. Did you know that in 2020, more than $600 billion dollars exchanged hands in the stock market on any given day? Every seller of stocks was met by an eager buyer of stocks. Is it possible that your wisdom in this moment is superior to the collective wisdom of the global marketplace? It’s possible – but not probable.
Warren Buffet’s teacher, Benjamin Graham, famously put it this way, “The investor’s chief problem – and even his worst enemy – is likely to be himself.”
Remember Your Plan and Work Your Plan: Act on your plan, not on impulse, emotions or current events. Think about it: the market has been making new highs since it began! Base your investment plan on the needs, wants and wishes identified in your Financial Life Plan. Investing based on your specific plan enables you to invest with intentionality because the investment plan is customized to your short-term (1-2 years), mid-term (3-6 years) and long-term (years 7 and beyond) needs. Secure and stable investments for the short-term, with increasingly growth-oriented invests for the mid and long-term.
Successful Prognostication is Difficult: Wall Street is full of market prognosticators – and their track record is dreadful. This graphic illustrates the low success rate of the investment professionals that practice an approach to money management designed to “beat the market”. Even the pros struggle to beat their own benchmarks over the long haul. Consider this chart for the 20 years ending on 12/31/2020. Of US-based, conventionally managed mutual funds, only 19% of stock (or “equity”) funds and 21% of fixed income (or bond) funds survived and beat their benchmarks.
The Odds Are Not In Your Favor: If you are still tempted to time the market and plan for that next major decline – remember that the odds are against you 3 to 1. Since 1926 equity returns (stocks) have been positive in rolling 12-month periods 75% of the time. By moving to cash you are expecting that the historical one negative year in four is right around the corner. Based on history that bet has very long odds against you. Peter Lynch, of Fidelity Magellan fame, shares this: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, that has been lost in corrections themselves.”
We enjoyed seeing many of you who joined us for our Party in the Parking Lot. It has been far too long since we were all able to get together in that way. We continue to pray that 2021 is filled with blessing for you and your families.
We are honored to have the privilege to serve you and the ones you care most deeply about.
Thank you.
Disclosures: Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients. Member SIPC. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against loss in a declining market. Investing involves risks including potential loss of principal and fluctuating value. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. This content is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services. Triune Financial Partners, LLC is an investment advisor registered with the Securities and Exchange Commission.