Ah, new love – the experience of starting a new, fresh relationship is nothing short of magical. Especially if you have been in a bit of a drought or a downtrend for some time. The grass is greener, the air is cleaner, and unfortunately – we often stop thinking clearly.
After many years of challenges, pandemics and such – it’s easy to get infatuated with a good market, individual investments or new ideas that seem supported at every turn. Maybe you thought I was talking about a new romantic adventure? No. But falling in love with a market that keeps going up can be just as painful when you come back to earth.
Since the low of the pandemic, most investments have performed admirably. Most of us have been able to enjoy the recovery and may have even settled into this new season of growth with the expectation that this rally will be evergreen. Some of you (and I know who you are) are a bit more cynical. After a few great months together, you see the writing on the wall and wait for the eventual breakup… because surely nothing good can last!
Long-lasting relationships are great teachers. Over time we learn to enjoy the highs and be patient and steadfast during the downturns. Storms are not fun, but they eventually pass. Managing expectations in the good times requires just as much maturity and level-headedness as surviving difficult moments.
So it is with life, love and portfolio management. We all need to remind ourselves to keep our emotions in check. Whether you are still spinning from all the twists and turns in U.S. politics or watching technology stocks grow to the moon, keep in mind that all these things are part of how we get an average return over time that supports our needs. Those average returns inform how we plan, and how we manage portfolios – in the great times and the hard times.
When the market moves like it is right now, many of you are tempted to do something big! Half of you are motivated by optimism and the other half by fear. Doing big things in the world of financial planning often carries big risks. If you have watched how we manage over time, we like to make small moves. And most of those moves are made to protect our ability to keep us close to those long-term averages.
The world has always been both a dangerous place and a place where amazingly good things can happen – sometimes simultaneously. Long-term relationships are the best! They typically produce the most growth and stability over time. Do your best to not fall in love with any one big idea. If you find yourself being driven to make big changes – let us help!