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Equities Had A Party, And You're Feeling Queasy?

Equities Had A Party, And You're Feeling Queasy?

| December 21, 2021
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The “markets” (most of the equity markets) are wobbling like the morning after a hard night of partying, doubled over and paying for prior enjoyment.

 

Today (Tuesday December 21st) seems to be off to a good start, but who knows how long it’ll stay like that. Yesterday? Not so much. And there’ve been a lot of yesterdays prior to today, even in the not-so-obvious sense.

 

As I’ve written recently…. I don’t think this will last forever, or even long enough to make wholesale changes to our portfolios or models, although there might be some tweaking in the near future. But as I’ve also said, these short term gyrations, that start off as emotional public reactions… if enough of them happen, for long enough without a break, they start to become a self-fulfilling prophecy.

 

So what’s the point? Sometimes you know you have a 2 or 3 or 5 year time horizon and you know what’s happening today isn’t really going to affect your values down the road that much, but you still feel the angst and the worry of your life savings being at risk. Particularly with all the volatility we’re seeing in today’s market.

 

If you have a long term viewpoint, and deep down, you feel what you have already is good for you in the long term, and yet, on the surface, you still feel that angst, then maybe you should try changing what you’re focused on.

 

After all…. Technology is currently getting whacked over the head. Share values have taken a beating lately. But from a long term viewpoint, do you really think renewable energy will go out of business, or is it going to expand like crazy over the next couple decades? Artificial Intelligence… Energy storage….. Human Genomics… digital entertainment… biotechnology… Financial Technology…  there are so many industries that are volatile now, yet on the verge of total explosion all over the map of our future.

 

If you’re invested in something you feel is an industry of high potential in the future, if you think you’ve made wise choices for the long term, than try changing your focus, if for no other reason than to help you sleep at night.

 

Make a list of how many shares you own of your different investments. As these holdings gyrate up and down, keep going back to that list, and compare how many shares you own to what you wrote on your list the last time you checked. Chances are, you’ll either own more shares or the same amount of shares. The value of your shares can lurch up and down all they want, but no one’s going to take your shares from you. Eventually, when you see those industries rising the way you feel they should, all those shares, even the ones that were so far down you needed binoculars to see them, should rise at the same time. It’ll be a glorious thing. But for now… not so you can ignore the facts of what is going on in the world around you, but just to keep your sanity, check out how many shares you own of each holding. And compare those amounts from time to time.

 

Through all the volatility, you’ll still own those shares. And when those share prices rise again, which you feel they’ll do because of their long term potential, all of your shares, even the ones that got beaten down, will rise again.

 

You never want to fool yourself. You always want to be cognizant of reality. But it’s also okay to not fool yourself by recognizing other realities, and not just the ones making all the noise. Your values may be fluctuating up and down, but you don't lose your shares. The amount of shares you own won’t go down unless you sell them.

 

Side note… Some investments give you interest, capital gains, or dividends. Mutual funds do, some ETF’s (Exchange Traded Funds), some stocks too. If possible, have those profits automatically reinvested into the funds that paid them to you. You’ll not only be putting your profits to work for yourself, but it’s a form of “Dollar Cost Averaging” where those dividends or interest payments automatically purchase more shares when the prices are down than you would have purchased when the prices are higher. Your portfolio fills with less expensive shares and when prices rise, all share prices of a given investment rise, including the ones you purchased by auto-reinvesting at lower share prices.

 

And…. another side note… This article references share prices coming back up and industries that have huge future potential. I really do feel many of the industries I mentioned are like the computer industry back in 1995. You knew it was coming, it was going to be huge, nothing was going to stop it, but you had no idea which companies were going to make it through the gauntlet (Gateway anyone? AltaVista or Lycos?). Sometimes, particularly with a relatively new industry (Energy Storage, Financial Technology, Artificial Intelligence), unless you have access to some really insightful research, it may be more advantageous to invest in entire industries through an index fund or ETF, than a single company. Very often, a rising tide raises all boats, and when you invest in an entire industry, when the major components of that industry rise, they’ll bring the entire industry with them.

Okay.... one more side note (I promise)... One of the things I, and Financial Concepts Unlimited, LLC are a stickler for, is getting the risk levels correct for any given client, and making sure their portfolios are appropriately allocated for each individual. If you find yourself exceedingly worried about the volatility you're experiencing, it may not be your focus you need to change. It may truly and simply be there's too much risk in your portfolio and it's not appropriate for you. One of the things I have found over the past 32 years in this business is that it's very easy to be comfortable with risk when everything is going well. It is only when the rougher patches show up that you realize how uncomfortable you are with certain levels of risk. So think about that too. You never want to make moves in panic, and you don't want to sell in panic certainly. But if you're having a hard time sleeping because of current volatility, it may be that you just need to change your perspective and focus, but it also may be that you have too much risk embedded in your portfolio and adjustments are warranted. 

If you have any concerns or questions, please feel free to call FCU. We're here to help.

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