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26 February, 2020 Education

I'll Never Say GET OUT


- President, Patton Fund Management, Inc.

ALL BLOG CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. ANY REFERENCE TO OR MENTION OF INDIVIDUAL STOCKS, INDEXES, OR OTHER SECURITIES ARE NOT RECOMMENDATIONS AND ARE SPECIFICALLY NOT REFERENCED AS PAST RECOMMENDATIONS OF PATTON WEALTH ADVISORS. ALL GRAPHS, CHARTS, AND TABLES ARE PROVIDED FOR ILLUSTRATION PURPOSES ONLY. EXPRESSIONS OF OPINION ARE ALSO NOT RECOMMENDATIONS AND ARE SUBJECT TO CHANGE WITHOUT NOTICE IN REACTION TO SHIFTING MARKET, ECONOMIC, OR POLITICAL CONDITIONS.  IT IS COMMON FOR US TO USE A FUND AS A PROXY FOR AN INDEX OR ASSET CLASS.  FOR MORE DETAILS SEE OUR FULL DISCLOSURE HERE.

No doubt we've seen some real volatility the first two days of the week. The coronavirus creates a great deal of unknown and unknown often results in volatility.

During periods of short-term volatility like this, we are often going to feel our fair share of it in our Super-Diversified Portfolios. It’s not pleasant but simply a given for investors…there’s just no avoiding it.

Although we will feel the impact of short-term volatility even with a Super-Diversified portfolio, if this short-term volatility turns into a longer-term and deeper decline / bear market, this is exactly why we Super-Diversify. We do generally expect to lose money in a bear market, again nearly impossible to avoid when seeking good long-term returns, but we expect to lose meaningfully less money than the stock market alone.

Short-term volatility and losses are simply unavoidable for long-term investors seeking good returns.

What Comes Next?

There is no way to know. As far as the coronavirus is concerned, it seems to be anybody’s guess as to how bad it may get (assuming it gets worse). Even if we did know, it would be impossible to then predict how the markets will react.

During these first two days of the week the S&P 500 has fallen by -6.3%. This doesn't happen frequently but it's not entirely uncommon happening 14 other times (a drop of -5% or more) since the current bull market began in early 2009. The good news is that one month FOLLOWING these two-day selloffs the market has been higher 13 out of 14 times by an average of +6.8%. The one time the market was lower a month later was only a loss of -1.4%.

Does this mean the market will be higher in a month from now? Again, it’s impossible to know but history seems to put the odds in our favor.

My Advice

I’ll never tell you to “get out”. I simply don’t believe this is a good long-term investment strategy. I know some investors are hoping I’ll suggest getting out because it seems as if it may reduce some anxiety that often accompanies market volatility. The fact though is that such a move more often causes more anxiety as the market, more often than not, turns around and goes higher. Sitting on the sidelines when the market is rising is tough.

Staying the course has been a proven investment success…over and over again.

My advice: stay the course.

Contact Mark A. Patton :

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Any specific securities or investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision including whether to retain an investment adviser.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions.  Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. This content was created as of the specific date indicated and reflects the author’s views as of that date. Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results.  Any comments about the performance of securities, markets, or indexes and any opinions presented are not to be viewed as indicators of future performance.

Investing involves risk including loss of principal.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. For more information on specific indexes please see full disclosure here.

Any charts, tables, forecasts, etc. contained herein are for illustrative purposes only, may be based upon proprietary research, and are developed through analysis of historical public data.

All corporate names shown above are for illustrative purposes only and are NOT recommendations.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.

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