Beyond the Headlines: Portfolio Resilience

At Morris Financial Concepts, we’ve noticed that after a long period with almost no downside volatility, equity markets have become more reactive to negative news over the past few months. Although broad market indices continue to reach new highs, the path has been bumpy as markets process inflation concerns, COVID news, potential Federal Reserve moves, and political brinkmanship in DC.  Negative news and market movements can certainly feel disconcerting, especially when we are all still trying to find more normalcy in our everyday lives. 

In times like these, it can be helpful to remember that with Morris Financial Concepts,  your financial plan is built to withstand volatility. As financial planners in Mount Pleasant, SC, we create investment portfolios that encompass a prudent mix of secure investments (with a goal of protection), and growth-oriented investments (with a goal of capital market participation). We understand the importance of having a participation component that, by design, can weather short-term declines to provide longer-term growth.  

In the short-term, stock markets tend to be driven by new information. The market absorbs and reacts to daily information, and uncertainty is an inherent part of that process. Markets go up and down. 

In the intermediate to long-term, markets are driven by growing economies. By thousands of diverse companies representing millions of hardworking people coming together and finding creative ways to push ahead. Financial growth is driven by the collective power of human ingenuity. 

Trying to anticipate or react to short-term moves in the market is more akin to gambling than investing. Robust investment strategies are born from a well-thought-out financial planning process. It is proactive, not reactive, and it accounts for market volatility because history proves it must.

Remember why you are investing in stocks:  to generate that real long-term growth for your financial assets. The trade-off for that growth is the acceptance of these shorter-term ups and downs. Historical charts of stock market returns demonstrate that those ups and downs can test our nerves at times, but that over time stocks tend to move “up and to the right”—growth.

I can pull an analogy from a recent call with Dimensional Fund Advisors:  think of investing in stocks as like going up a staircase with a yo-yo. If you focus on the yo-yo, it can feel like constant ups and downs. But if you focus on the staircase, you will see that the general trend is up (growth). Remember that the goal for the equity portion of your investments is growth, know that we always plan for shorter-term ups and downs, and give yourself permission to ignore the day-to-day noise and distractions. Markets reward patience.

At Morris Financial Concepts, we continue to focus on the things we can control (prudent portfolio design, appropriate asset allocation, investment selection, rebalancing, tax planning, expenses) and accept the things we cannot control (interest rates, tax rates, politics, and forecasts from pundits). 

Although market downs (and accompanying changes in portfolio values) can be challenging at times, remember that they are an unavoidable part of investing. Nothing about these periodic declines changes your financial plan. Although we cannot predict them, we do expect them, and through us, your plan can be resilient to them. Know that our financial advisors at Morris Financial Concepts are looking out for you.