Markets and Traffic, similar?

The end of July and beginning of August showed that volatility continues to show its hand. Honestly, WHO CARES? Volatility is the cost of admission into creating wealth and entry fee into capital markets such as the stock market. Volatility will benefit you and outweigh any bad you see in it, but it will only hurt you if you don’t have a plan in place or a consistent investment strategy working for you.

I have been saying it for a while to my clients, expect a 10% downturn at some point this year in the broader markets. It is par the course given the dramatic highs we have seen and the “magnificent 7” leading a lot of returns of many index funds we grow to concentrate most on. 500 Index, Total Stock Market Index, though we did not hit the 10% dip we did come close at the beginning of August. On July 16th, the S&P 500 was trading around 5600 and the NASDAQ around 18300. A couple weeks after that we saw a 5%+ dip in the 500 index and over a 7% dip in the NASDAQ Composite. Talk about a little shock to the portfolio but more impactful is the mental effect of this on investors. You begin to question the path forward, are we in a recession? Is this the start of the downturn many analyst have been calling for? If you had any of these thoughts run past your mind, please reach out so we can talk and step back from the ledge.

As I said earlier this volatility is part of the game and I will say it again, WHO CARES about this this little volatiltiy. If you do, honest truth, you need to re-analyze your ability to invest and take a deep look into your portfolio. Analyze it to see if it matches your expecations of risk and reward.

So traffic and investments, what gives? I found myself and my thoughts wondering the other day as I sat in a little traffic on my home with many options in front of me and a solid playlist going. I had the ability to exit early and go an alternate route. Or just continue on the current path and sit in a little traffic. Both options have the same goal in place, get me to point B (home). One may take a little more time. The alternative route may burn more gas, on a micro-level, costing more and there is no guarantee that the alternative route will end up saving me any time at all. With your investments, you can keep the same portfolio orginally designed or sell and switch things up. The big question here related to both traffic and your investment portfolio, why are you letting a known possible factor/risk (traffic and volatility) impact your short-term decisions? Now I am exlcuding the, low probability event of the huge pile up on the interstate and it closing, requiring you to take an alternative path, equating to the complete collapse of all financial systems on purpose.

Most of the time not making any changes to your pre-planned route is going to be the answer. Stay invested in your current portfolio, stay on the current route with the traffic. Why? Because you knew this was a possibility and it will get you to the final destination and goal, and you are OK with the decision. Now there are many factors that are part of the plan whether it is the finanical plan or traffic, that you can control. Time you leave, the specific route or portfolio that you are in, the mindset of accepting a potential delay recgonizing the bigger picture of arrival at the destination or goal, and finally how you choose to react to temporary inconveniences.

Deciding to go an alternative route whether in your investment portfolio or if you hit some traffic while traveling. It could be better for you, I will be honest, but it will come at a cost (good or bad, we won’t know until its over) and it does add another level of unknown to your orginal plan. Staying on your orignal travel route or in your already strategic and tactical portfolio. If you hit volatility it is designed to weather that already, it will include predefined alternatives or changes (general rebalances, tax loss harvesting, etc.). Where as if you choose an alternative route based purely on reaction to a volatile market, you are winging it, adding unknown risk and most likely substantially decreasing the potential of return on your portfolio.

Once you hit volatility with a strong tactical portfolio, not much more can effect it. Keeping the goals and your investment objectives insight, whether intermediate or long-term. The volatility will pass by and you will end up on top. Do not over complicating it and making short-term, on the cuff moves, you cannot afford it. It is also statisically proven that reacting during volatile times hurts portfolios more often than not.

Tactical Wealth Planning LLC is a registered investment adviser.  The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.