I remember not so long ago on October 12, 2022, when the S&P 500 hit the annual low of 3,491. I knew that the stock market was on a decline. A quick visit to a news site tells me there were (and still are) concerns over the recession, inflation, and geopolitical events. After all the noise about the debt ceiling, a deal was struck.
However, as I write this note (6/682023), the S&P 500 is at 4,290. Up 22.5% from our October 2022 low.
You might be asking: Shouldn’t we get out of the “stock market?”
The simple answer is: NO.
We advise you to stay in the stock market.
For those of you who are clients, you will remember that in the beginning, we…
1/Made an investment plan.
2/Funded that plan based on your dreams and goals.
3/Set money aside for our emergency funds, major purchases, and five years’ worth of portfolio income.
One of the keys to long-term investment success is to avoid the interruption of the compounding of the company’s earnings and dividends.
We do this by having other places to go to get money each year.
All our “eggs” are NOT in the same basket.
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Core Beliefs
1/The economy cannot be consistently forecast.
2/Even if we could forecast the economy, we could not consistently forecast how any “market” would react to that information.
3/ “Markets” cannot be consistently timed.
4/ “Stock market” returns in the short term are random.
We believe that your dreams determine your plan and your plan determines your portfolio.
If your dreams have not changed, there is no reason to change your underlying investments in the portfolio.
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Why do we fund financial plans with ownership in companies (i.e. the “stock market”)?
The answer is three-fold.
1/ People buy stocks for the potential for appreciation.
For example, you ABC for $10 and it appreciates $25.
2/ However, another benefit is the dividend and the potential for dividend growth.
[Dividends are not guaranteed]
Over the years, I have become fascinated with the idea of endowing your family with an increasing stream of income that could create intergenerational wealth.
3/ Finally, ownership in companies is betting on human ingenuity and our ability to solve problems.
I want to share with you an example from Waste Management.
[please note that this is not a recommendation to purchase WM and is currently not in our investment portfolios]
Waste Management couldn’t find employees to stand on the back of their garbage trucks. The workforce told them, “We do NOT want to do this work.” It is physically demanding work, and they couldn’t fill the job.
Waste Management spent money on automation to fill the job.
In addition, WM found a way to capture methane gas at their landfills. They then use the captured gas to fuel their natural gas trucks. WOW!
This is just one example of many that are happening throughout Corporate America.
Do NOT underestimate our ability to solve problems in the face of whatever challenge lies ahead.
If any of your friends or family have financial or stock market questions, we are happy to be a sounding board for them.
If they are important to you, they are important to us.
–Nic & Jeff
We are a full-service financial advisory company that allows you to make a one-page plan for your money and prepare for your future. Learn more about what we do and how we can help you here.
