So, what happened to a quiet, boring August in the stock markets?
So much going on. So much. And so far, August has been the most volatile month of the year in the stock markets. There were a few stomach lurchers, including big drops on August 5th (6th in Canada), the 14th and the 23.
September has been much more steady although down today due to talks of impeachment. The overall numbers at September 20th are back up to over 18% gains year to date in both Canada and the US. Volatility is normal, although not fun. And there is a lot of uncertainty still with trade, tariffs, economic growth etc.
Three things to keep in mind:
- In investing, there is no return without risk. It just doesn’t exist. Put another way, the equity market doesn’t go straight up. Think of it like playing with a yo-yo while going up an escalator.
- If you had invested in the US equity markets on any day — any single day — since 1926 and kept your money in for 15 years, you would have had a positive return 99% of the time, according to a study by Oppenheimer Funds.
- Nobody can consistently “time” the market, buying at market lows and selling at market highs. Even the greatest investor of all time, Warren Buffett, doesn’t believe in timing the market (which may be one of the reasons he’s the greatest of all time). In fact, the primary reason that individual investors typically earn less than the returns of the stock and bond markets over the past 20 years is because they tended to panic when the market panicked, and get overconfident when the market was going up, thus making the wrong moves at the wrong times.
Right now, there is lots of uncertainty – when will the next recession happen, what’s going on with President Trump and trade and tariffs etc.
So, what should you do? The answer, in most cases, is “nothing at all.” Market up-and-downs are a part of investing. That means we plan for them when we build your investment portfolio.
But if you’re the type for whom “nothing at all” makes you crazy, here is what you can do.
Check to see that every portfolio you’re invested in is well-diversified.
That means not putting all your financial eggs in one basket by including a mix of investments that move differently in the markets.
Let me know if you have any questions.