Hello,
We wanted to reach out to you in the midst of recent events. There is a lot of factual new information about health concerns, economic disruption and stock market declines. This mix of health and economic uncertainty can be difficult to deal with. Market declines can be stressful and perhaps even anxiety ridden.
First, we know that markets are responding to new uncertainties, and while it can be difficult, even stressful to witness this, we know these events occur. Stocks historically have produced returns reflecting the risks taken. For most of us, the alternative of holding a portfolio of high certainty, low return assets is not expected to provide us with long term financial security.
Second, we cannot predict how long this uncertainty will continue to affect stock prices.
Third, and hopefully you know what we are going to say here, we have designed your portfolio to be robust. To respond to market risks and eventual expected recoveries, to provide for the long-term benefits of being invested in capitalism. We have planned for uncertainty in our work with you.
We are not saying that this won’t be hard. The market might keep dropping. After each subsequent drop the decision not to sell after the previous drop might seem regrettable. Everything is obvious in hindsight. Narratives will make us believe that this time is different; while the narrative might be different, challenging and uncertain times are nothing new.
Just this century we have seen the dot com crash, the 9/11 attack on the world trade center, Ebola, the Swine Flu, SARS, the Global Financial Crisis, and the start of COVID-19, while the MSCI All Country World Index ( a measure of worldwide stock returns) delivered an average annual compound return from January 2000 through February 2020 of 6.56% in Canadian dollar terms. We are not saying that this time is not different – we are saying that investors have a long track record of being compensated by positive expected stock returns in exchange for taking risk.
On any given day, including after a market drop, the best thing that we can do is stick to the plans that we made in calmer times. Stocks might continue to drop, but this is why you invested in a risk-appropriate portfolio and stress-tested your financial plan.
In the moment, when things are uncertain, it can be challenging to make good long-term decisions. This is why you made a plan, and now is the most important time to stick to it.
In times like this there can be a very human need to ‘do something’. We encourage you to remember that in our work together we have done something already. We have planned for uncertainty. The design of the portfolios, the financial plan and our discussions around your overall financial well being are all part of this.
At the same time this is not to say this is easy. That is what we are here for. Reach out, send us an email or give us a call. We are here to help you move through this.
In the meantime, we are reviewing portfolios for tax loss selling and rebalancing opportunities and otherwise ensuring we are providing you with the services we always have.
Just a reminder that we are working remote and so we are meeting by video conference or phone. You can reach us by email or at our regular phone extensions.
There are also some ideas on how to deal with any stress you may be feeling in the article linked here: https://www.snapclarity.com/blog/5-ways-to-cope-with-the-covid-19-crisis/
Cheryl, Nancy & Brady
