The Last 12 Months Have Proven Just How Difficult Market Timing Can Be
Who saw it coming? The S&P 500 is up 32.77% over the last 12 months at the time of this writing. If you saw it coming, you’re one of the fortunate ones. This time a year ago most investors had their spirits down coming off a 7th FED rate hikes in 2022, and not knowing when the FED would pause led very few to be optimistic about what was to come. Throw in an election year this year, and even more uncertainty seems to be on the horizon. What we saw in reality is that we had one of the best 12-month rides in recent equity history, proving once again that it’s time in the market that gives you the best chance of success, not timing the market.
The great author Morgan Housel tells us in his book, The Psychology of Money, that “volatility is the price of admission”. As I’m watching my T.V. screen right now, Iran is bombing Israel. Geopolitics can rock the markets. It’s days like today that remind us that peace and health are two of the most important things. Over the course of one’s life, things will usually work out; however, you better have a plan! If you don’t prepare then the volatility bug may get you too! It’s on days like this that we are happy that we have bucket #1...which in our practice means a bucket of cash. This bucket is purposefully designed for days of volatility where the rest of our portfolio can get the long-term returns that everyone desires for prosperity and retirement. You want to have a mapped-out plan for different phases of life.
The one thing we know for sure is that we really don’t know anything. Uncertainty is all that we are guaranteed. We are never sure what the next great invention might be (A.I. for example), or the next worldly conflict, like October 7th. History tells us that these things are likely to happen, and we must be prepared to weather the storm. Volatility is the price of admission, but one we’re willing to pay in hope of getting the returns we want over an extend period. Have a mapped-out plan for debt, retirement, Social Security, education, disability, wedding, vacation, and even death. It doesn’t just work out; you have to help it work out. Please let us know if we can help!
Past performance is not indicative of future results and diversification does not ensure 2 profit or protect against lost. All investments carry some level of risk, including loss of principle. An investment cannot be made directly in an index. Robert W Baird and Co incorporated. JH2024-1002