Financial Insights

The Wall of Worry & Shaking It Off

Mark Twain once commented, “I have been through some terrible things in my life, some of which actually happened.” The same can be true for investors. We often waste precious time and valuable energy worrying about every headline and potential catastrophe, but how many of us look back to see if what we were worried about in the past ever occurred?

The reality of many of these terrible things is that they were imagined in the first place or they were manageable with a game plan. The ability of stocks to overcome investors’ concerns has inspired a common phrase: “Climbing a Wall of Worry.” We’ve seen this in action time and again across the world.
It’s amazing how quickly we’ll all forget our panic over the debt ceiling “crisis”, but the same can be said for Russia’s invasion of Ukraine, the China-US trade war of 2018, Brexit and the Trump election in 2016, the eurozone debt crisis, etc. The list goes on and on so we’ve included “30 Reasons Not to Not Invest” in the last 30 years for some additional perspective.

There’s a catchy negative news headline everyday as this is part of the media’s business model. There’s also a whole industry of financial “fearmongers” who serve to peak our curiosity and fear, which hopefully gets you to click on the headline (“clickbait”), which helps the internet platform you’re engaged with to sell more advertising.

And amid all those periods of intense worries held by investors, stocks ultimately resolved to the upside in a big way because the fears did not play out as many had thought they would.

It’s ok to worry.  It’s only natural to worry.  For most of human history, anxiety and worry were emotions that served humans well — if you saw a predator such as a lion or grizzly bear, you ran!  We are still wired to respond to perceived immediate danger even if our financial goals are much longer term in nature.

For instance, you set a goal to work hard and get a paycheck every two weeks so that you can save money and retire in 20 years.  The problem for investors, given that money has time value, is that the more that we overreact to immediate dangers, then the less likely we are to meet our long-term goals.

The JP Morgan chart below shows that it’s paid off to stay fully invested throughout various crises and market turmoil vs. trying to time getting in and out of the market and moving to cash.  To put it into context – during those 20 years, there were over 5,000 trading days and missing just 10 of them cut an investor’s return in approx. half, from 9.4% to 5.21%.

Remember the initial outbreak of COVID-19 in 2020, when you crossed the street on your walk to avoid contact with your neighbors and you sterilized everything you brought home from the grocery store after leaving it in the garage for a week? If you stayed invested for all of 2020 and were invested in the S&P 500© index, then your portfolio was up +19% by the end of the year.  If you missed the 10 best days in the market in 2020, then your portfolio was down -33%!

Even during shorter periods of time like a calendar year, the best days in the market are typically close to the worst days.  Trying to make a decision to get back into the market within days of a having made a fearful, emotional decision to exit the market is virtually impossible.  As a result, the better decision for most investors is to simply stay invested, which historically has paid off.

How can we learn to stop worrying and ignore the daily noise from media outlets?

  1. Understand what you need your money to do for you so you can choose an appropriate investment strategy for your portfolio. This will allow you to have a game plan in place so that you can be proactive vs. reactive each year.
  2. Recognize market history (the long-term trends versus the short-term blips), the role of each of the asset types in your portfolio (cash, bonds and equities) and how they fit into your plan.
  3. Check in on your overall asset allocation and whether you have enough cash and fixed income (bonds) to smooth out the ride in your portfolio and improve the probability that you can stay invested during the inevitable periods of equity market volatility.
  4. Lastly, try to remind yourself that each of the terrible things you worried so much about never did happen.

If you have any questions, please do not hesitate to reach out to your ACM Wealth Advisor.


The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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