Play It Again, Sam.
Let me take you on a quick walk down memory lane. The year is 2006. As the year begins, the S&P 500 index is approximately 1268 (exact values are not as important as the message to come). By the end of 2006, the S&P 500 has a value of approximately 1418, representing a gain of just shy of 12%. The real estate market was booming, with prices being driven up by market demand.
By October 2007, the S&P had reached the lofty value of approximately 1561 (what would turnout to be the peak of that cycle), only to begin a descent into the events that caused the crash of 2008.
What if your financial advisor had come to you in mid-late 2007, or even in early 2008, and suggested that it might be time to realize some of the gains of the past two years? Do you remember what you were thinking/feeling at that time? What do you think your response would have been?
Of course, it is with hindsight that the events that occurred are crystal clear. Did you feel the same concerns as the markets began 2016 in a volatile state? What if your financial advisor were to come to you today and suggest that it may be time to take some risk out of your portfolio, due to potential disruptors like the presidential election, Great Britain exit from the EU, the Yellen/Fed (now you see it, now you don’t interest rate hike), China slowdown effect, etc.
The above chart illustrates resistance/support levels that the S&P 500 index has been trading in for a fairly long time. At some point, it is safe to say, that either the index will move in one direction or the other. Are you willing to stay invested and see the market go down? Are you willing to be on the sideline and see the market go up? These are tough questions, as fear and greed have been proven to be the underlying emotions in the investing world.
“I want all of the upside of the stock market, with none of the risk” is the norm, but not the realistic request of investors.
In today’s volatile world, we are working closely with our clients to help them figure out the answers to our questions and position their portfolios against the unknown. If you are not currently a client, we welcome the opportunity to do the same for you.