Ouch!....not again, everything was going so well…
- mbacapitaladvisors
- Apr 11
- 2 min read
04/04/2025: We are in day two of huge drawdowns in the market. We anticipated this…not that we are so prescient as to know when, it is just that using history as our guide, these events happen with a higher degree of frequency than we wish. But it is important to know, as Napoleon stated so eloquently, “A genius is the man who can do the average thing when everyone else around him is losing his mind.”
You may have heard from the many of the talking heads on the financial news media sites, in one of the few times they are actually helpful to the average person who owns stocks, panicking and moving out of the market is, from an odds perspective, a bad move. You can do an internet search and find on multiple reputable financial websites, e.g., *Fidelity Investments, illustrations showing that missing the 10 best days in the market from 1/1/1980 to 12/31/2022 resulted in a terminal value 50% less than that of the investor who remained fully invested for the entire period. The Fidelity Investments illustration using the dates above reflects that a $10,000 investment in the S&P 500® and staying fully invested through December 2022, had a terminal value of over $1 million, and missing the 10 best days resulted in a value under $500,000.
It is the outsized good market days that make the difference. The problem is, how to know when they will happen…and being in the market before they do. Well, we have yet to meet someone who can do that, so while the majority of market days over history are positive, being fully invested is the one way to know your portfolio can receive the benefits of not only the 10 best days in the market, but the many, many days beyond the top 10 that drive a portfolio’s highest returns.
The market has appeared “rich” for awhile now. Meaning prices were elevated vis-à-vis corporate earnings, but sometimes this happens and the market flattens out for a period and then earnings catch up, and other times the market pulls back to be more in line with earnings. The case today is a little bit of the latter, and a lot to do with the Administration’s aggressive tactic in trying to bring parity to the world of tariffs. These kinds of exogenous events, as was the COVID pandemic, often are a great opportunity for those who can maintain their focus.
From our May 2023 newsletter:
We have endeavored to instill in clients that Investing is for the long run, in previous newsletters we discussed Warren Buffet’s wisdom when he opined that “The stock market is a device for transferring money from the impatient to the patient.”
We are here, every day, if you want to talk risk or strategy, or about how wonderful your kids are (certainly we will share with you how wonderful ours are…) just give us a jingle.
We appreciate your friendship and business.
We are, sincerely yours,
Dave & Drew
Comentarios