To no real surprise, stock markets have continued on their fluctuating short term ride through this week. In these times, it is always prudent and comforting to consider comments of the some of the most notable investor’s of our time, perhaps none better than Warren Buffet. leo.
We are always drawn to this quote for the simple fact that in turbulent times, there is a propensity to act; the idea that you have to do “something”. Quite to the contrary, if you have already been smart enough and disciplined to construct a well thought out diversified investment portfolio, than any sudden activity will surely sabotage what you were planning to accomplish in the first place. The evidence based on human behaviour is actually quite shocking.
Consider the graphical evidence below. This is all a result of incredibly poor investor (human) behaviour. People doing “something” when they should perhaps be doing nothing.
We are here to help guide you through these difficult times. Your behaviour is and will remain the largest determinant as to whether your long term financial goals are met.
We shared a chart in a previous communication showing the intra-year declines vs. calendar year returns in the Canadian Equity Market. Let’s now look at the same thing for the broader US based S&P500 Index which tells the exact same story. The chart once again offers an excellent reminder of how in any given year, markets can and will fluctuate significantly. The DARK BLUE AND RED lines represent annual calendar year returns while the LIGHTER BLUE dots represent the worst decline during a given year. Also as before, you will notice that over time, there are always more positive years than negative years. For all our of clients, the results over reasonable time periods are even better since we never invest in the “market”, we only invest in well structured, professionally managed, diversified portfolios of the best businesses in the world.
As we continue to message, it has never been more important to stay the course with our longer term investment plans. We will continue to provide helpful, constructive and pertinent information.