063. What To Do When The Market is Unpredictable

<p>The past few weeks have been turbulent for the stock market. While we like to remind our clients that drops are normal and part of the journey to building long-term wealth, the speed at which the market dropped was historic. Only a few weeks ago we were near all-time highs!</p> <p>It’s easy to get caught up in the distraction of short-term market performance. I keep a running list of quotes from famous investors and authors that I use for encouragement when it seems like all the news is bad news. Here are some reminders to help get you through this tough time.</p> <p><strong><em>“In a well-diversified portfolio, only people can create permanent losses.”</em></strong> <strong>-Nick Murray</strong></p> <p>The value of your investments will fluctuate daily. Though we say things like “the market lost 5% today,” you’ve not actually <em>lost</em> that money. How do you create a permanent loss of 5%? By panic selling and locking in that loss.</p> <p>The first part of Murray’s quote— “in a well-diversified portfolio”—means that you aren’t concentrated in only a few stocks. Companies can go out of business, thereby making your investment worth nothing.  As long as you are <a href= "https://stewardship.pro/2019/08/21/investing-what-is-diversification/"><em>broadly</em> diversified,</a> you’ve minimized this risk.</p> <p><strong><em>“Dieting and investing are both simple, but neither is easy.”</em></strong><strong> –</strong><strong>William Bernstein</strong></p> <p>We know we need to exercise, eat healthy, and get plenty of sleep. Easier said than done! Likewise, investing isn’t overly hard, but sticking to an investment plan when you see your account balance dropping can be difficult.</p> <p><strong><em>“The problem is that we tend to think of ‘risk’ as a fixed concept—that is, stocks are riskier than cash and bonds…period. But risk can only be accurately assessed in combination with a time horizon.”</em></strong> <strong>-Patrick O’Shaughnessy</strong></p> <p>The real risk is not your account value going down in the s