Schedule a call with Jim or Neal to discuss your concerns below. Simply select a date and time that is convenient for you. We will call you at the time you select.
Investment math can be complex. If a stock dropped 10% this quarter and gained 10% the next, you might think you have recovered the loss. Unfortunately, you are still down 1%. To recover the loss, the stock has to increase 11%.
The bigger the decrease, the more it takes to recover. A 20% loss means you need to earn 25% to break even. If you lose 35%, you’ll need to make 54% to erase the red ink. A 57% drop like we saw during the great recession requires a whopping 132% increase to completely recover.
Investment math isn’t addition and subtraction. It’s multiplication.
From February 19 to March 23, the stock market dropped 34%. In the 99 days that followed, it gained over 38.6%! It didn’t erase all the losses, but it was a strong start.
Download a pdf copy of our June Newsletter. In this issue we cover:
In mid-June, Fidelity made a shocking announcement. Earlier this year, one-third of all their account holders, age 65 and older, sold all their stock positions. Nearly one out of every six account holders—regardless of age—sold all their stock positions.
It is possible a few sold before the market crashed. But remember, we went from an all-time high to 34% lower in 33 days. More than likely, most of those sales happened after the damage began.
Sitting on the sidelines means the investors who sold missed the incredible gains. They wanted to limit further damage, but doing so limited their ability to recover. Remember the investment math. If your account drops 20%, you need to earn 25% to break even. Those who sold their stocks will have trouble doing that in a money market fund or CD.
Bear markets are extremely unpleasant. But when they happen, one of the worst things you can do is move to the sidelines. Bottoms happen without notice. Often times the first few months after produce incredible gains. Missing those gains makes recovering the losses difficult at best.
Uncertainty remains a common theme. The coronavirus is still a part of the story, and it looks like it will be for the foreseeable future. An ugly and intense election season will start soon. Being a patient and disciplined investor is an ongoing challenge.
Over the long term, we remain optimistic. We believe the great businesses will continue to not just survive, but thrive. But in the short term, anything is possible. The next several months could be a very bumpy ride.
Judging by the data, our ask a CFP pro show has been very popular. We need your help to keep it going. Click the picture below to send us a question. We’ll answer it on an upcoming show.
Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors. He specializes in helping hard working, middle class families plan for retirement.
TD Ameritrade is our primary custodian. They hold almost all of our client investment accounts. On Monday, they announced a deal with Charles Schwab.
Here are some highlights:
You can also email us at neal@flemingwatson.com or jim@flemingwatson.com
Quarterly reports will be mailed out very soon. Included with those reports is our September Client Letter. If you would like to download a PDF copy of the letter, click on th image to the right.
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Click Here, to read our March Client Letter. In this issue we address our reasons to be both optimistic and concerned about the stock market in the next few years.
Thanks for reading!
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You can read our previous client letters on our blog page. We publish our client letters in March, June, and September each year and mail them to our clients. In addition, we make them available here on our website.
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