I had a financial planning meeting with Bob last week. Going through his investments, he noticed they were up 7%. He was both delighted and surprised. How could this be with everything that is going on in the markets?
Bob looks at his portfolio once a year when we update his plan. For the other 364 days of the year, he gets on with his life and lets the markets do its things. Even though his investments are down -17.81% so far this year, Bob doesn’t take short term views of his investments, he is a long term investor and so he doesn’t need to look at his investments every day or even every month. Afterall, he can’t control what is going on. And he understands that the more he looks, the more he’ll worry. And the more he worries, the greater the chance of him doing something that will ease his worry in the short term but it will be costly to him in the long term. So he doesn’t look.
Bob also trusts the process. When he invested his money, it isn’t just invested in the “fund of the month”. There is an investment process behind where his money went and why he has the investment allocation that he has. There was a conversation about what will happen when there is a crash (not if). While there is a big difference between the hypothetical conversation of a fall in markets and actually seeing his money fall in value, it has been planned for. We just didn’t know what was going to cause it and we can’t guess how bad it will be or how long it will go on for.
What we do know though is that Bob’s money isn’t exposed to unnecessary investment risk. We are pretty boring when it comes to investment strategy, investing in a diversified basket of quality companies. We are boring because we want Bob to grow his money over the long term. We don’t believe in constantly investing in the hottest stocks. That leads to extreme volatility and the chance of Bob losing all his money.
If you are worried about your investments, stop looking at the values and remember to trust the process. And talk to your advisor, it’s good to let them know that you are worried. You can talk these things through.
27 June 2022