I understand it is hard not to be affected by the news on days like this. My encouragement is to trust.
- Trust the win-win-win process of investing. The management teams and employees at the companies in your portfolio are all working hard to compete, be profitable, innovate and build market share amidst changing conditions. Your long-term investment in these companies allows them to do their job, create new or better products, deliver faster services and create more value for all of the company's stakeholders. That process of combining investor capital with productive,
hard-working people has driven the greatest explosion of worldwide wealth in history over the past two centuries. It takes time but that's the real process you are participating in as a stock investor. It's not just a stock price. It's people.
- Trust the construction of your portfolio. There is a reason we build portfolios with hundreds or thousands of companies instead of just a handful. Diversification is both a mathematically and practically sound strategy and it shines on days like today. We know that intelligently combining different types of risky assets reduces the overall volatility level of the portfolio. Changing strategy midstream undermines the structure of the portfolio. Let diversification do
its work.
- Trust your financial plan. The value of a robust financial plan is it creates clarity about where you are, where you are trying to go and how much you need to get there safely. It also provides the information and perspective needed to make better decisions throughout the journey. Your plan has been tested under stress to see how a wide range of possible future market returns will impact your ability to reach your goals. Trust the plan.
- Trust your timeline. We have done the work with our clients to identify their future expenses so the money they need to spend in the near term is not exposed to market risk. We do this because we expect risky assets to be volatile over short periods. We aren't trying to "thread the needle" and just hope the market isn't down on the day a client needs to write an important check. We don't take market risk with those dollars. The money our clients have invested in
their growth portfolios is, by definition, long term money. That means they have the other most important ingredient needed to be successful stock market investors - TIME.
We have a saying in our house: Discipline brings freedom. A lot of discipline and hard work have gone into your planning process. Thriving amidst market volatility is not about being unemotional, dismissive or ignoring reality. It's about being intentional and trusting the process. Enjoy the freedom your hard work and discipline have enabled. Go for a walk, go see a movie, gather
with friends, make plans for the summer, eat good food, go after your next big sale or project at work or listen to an intellectually stimulating podcast. Because of the work that has gone into building your plan & portfolio, the reality is "Some stuff happened today. You don't need to do anything about it.".
Thank you for your trust and your time.
Sincerely,
Adam Broughton, CFP®, CPWA®
