By Maurice Stouse
As investors continued to see higher highs in the stock market, and consistent lows in interest rates in the bond and money markets, they wonder how long each of these trends could or would continue. Looking at things historically can remind investors to think of the market like they think of the seasons.
Each of the markets has its spring, summer, fall and winter although the timing of the markets doesn’t necessarily move in locked step with the seasons. Investors wondered how long summer was going to last for stocks, and when their harvest should be (many not having seen one like this before). Was it like an extended summer (where summer would last well in to fall)? And what about the winter for interest rates? How long could winter last and does it really snow in Denver in May and even June? Yes that has happened. As a matter of fact it snows somewhere in Colorado all 12 months of the year.
Going back in time, there have been some long winters, and extended falls in the markets. Would you believe that the stock market was higher in 1971 than 1981? Or that interest rates were in the mid-teens in the 70s? Back in 2008, and well in to 2009, investors wondered just how long the fall would continue.
Investing takes patience, discipline, confidence, consistency and ultimately, time. Yes the falls can seem to last forever. When does someone know that winter has passed and the sprouts of spring have begun? Time and patience are so critical because, while it is possible to know when spring, summer, fall and winter come and go, the timing is unknown in the markets. In the summer of a market investors can be frustrated when not knowing when to harvest. Many see success by planning their strategy and allocation to account and allow for the fall and the winter.
Many successful investors have seen that time in the market is more successful than timing the market. If you aren’t in the market, you might miss the spring and come in too late in the summer. If you aren’t in the market, how do you know when is the best time to invest? We’ve heard it many times that the best time to invest is when you have the money to invest. And when it comes to confidence, it is important to remember, in the depths of winter, that growth has come again, and the spring and the summer ultimately arrive.
A word or two about allocation. Many savers and investors spread out their dollars in the stock, bond and money markets with an allocation strategy. That way they are always poised to take advantage of growth but also not over committed in any one area. Rebalancing periodically can also be important in order to maintain an allocation strategy.
Lastly, consistency through investing, by continually adding to a strategy over time (systematic investing like a 401k, IRA or college savings plan). You buy more shares when prices are low and fewer higher priced shares when prices are higher therefore your cost is the average over time. You are investing in all of the seasons, over time.
Contact or visit with your advisor today to start the conversation about the markets, seasons and your own goals and needs.
Maurice Stouse is a Financial Advisor with Raymond James and he resides in Grayton Beach. He has been in financial services for over 30 years. His office is located at Raymond & Associates, Inc., 34851 Emerald Coast Parkway, Suite 200, Destin, FL 32451. Raymond James advisors do not offer tax advice. Please see your tax professionals. Raymond James & Associates, member New York Stock Exchange/SIPC. Phone 850.460.1995. Email: Maurice.firstname.lastname@example.org.
Views expressed are the current opinion of the author and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts will occur. Investing always involves risks and you may incur a profit or a loss. No investment strategy can guarantee success.
Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. The process of rebalancing may carry tax consequences.