News & Insights
Keeping Calm with Market Volatility
With today’s news that Russia has invaded Ukraine, equity markets have come under additional pressure, adding to what has already been a difficult couple of months as continued concerns over inflation and rate hikes, have plagued investors. Dealing with geopolitical risks is inevitable for long term investors and almost always present. Headlines from regional and global news are typically more alarming as they are outside the normal market and business news cycle. These events are difficult to analyze and even harder to forecast how they will end. Markets never like uncertainty. The increased volatility along with the aforementioned “wall of worry” have many investors wondering if now is the time to sell their stocks and bonds and ride out the uncertainty on the sidelines.
In the short term, market swings are impossible to predict and any investor trying to do so would need to get it right twice, not only on the sale, but also on when to buy back in. Rather than trying to predict what happens next, we believe it is paramount to plan and expect volatility. For long-term investors, it is not the timing of investment but rather the time spent invested that matters most.
The chart below from BlackRock (updated through year-end 2021), shows the hypothetical growth of $100,000 invested in the S&P 500 over a 20 year period and the effects of missing the 10 and 25 best days in the market. Since over the last 20 years, 24 of the 25 worst trading days occurred within one month of the 25 best trading days, missing the “best” performance days limited the overall return, while staying invested through all the down markets resulted in the most growth.
We understand that when markets get volatile it can be tempting to change course to avoid additional losses and wait for the uncertainty to clear. However, history has shown that by the time one feels comfortable to invest again, the market has already recovered. To avoid these types of behavioral mistakes it is important that investors have a strategic investment allocation designed to meet their long-term goals and objectives. Formulating an investment plan beforehand will keep focus on long-term goals and not the daily, weekly, or monthly moves of the market.
It is always our recommendation that investors not overreact to recent short-term market movements and remember that we cannot predict, but we can plan.
The Information contained in this document is based on data received from third parties which we believe to be reliable and accurate. YorkBridge Wealth Partners, LLC has not independently verified the information and does not otherwise give any warranty as to the truth, accuracy, or completeness of such third party data, and it should not be relied upon as such. Any opinions expressed herein are our current opinions only. YorkBridge Wealth Partners, LLC is an SEC Registered Investment Adviser under the Investment Advisers Act of 1940 (“Advisers Act”). Registration of an investment advisor does not imply any specific level of skill or training. The information contained in this document is to assist with general planning. Please consult with your own tax advisor and attorney for more specific information.