Note: This published on December 30th, 2022 and may not be reflective of current market or investing issues.
When I say ‘fear factor,’ I’m not talking about that old American television game show from the early 2000s where contestants blindly stuck their hands in boxes of spiders *shiver*, among other ridiculous stunts, in an attempt to win money. I’m referring to good, old-fashioned fear, apprehension, alarm, and distress.
I know, this post is starting off on a strong, positive note. But stick with me. You know I’ll turn this into a story about financial planning or investment management, and you’re not wrong.
I have often told my clients and prospective clients that I’m not a “market watcher,” which is why I love having a dedicated investment advisor here at Longview. I have a confession to make: that’s not entirely true; however, my market watching is due to tracking the market for clients who are interested in putting set-aside monies to work in the market.
But when the fear factor sets in, it can make us do irrational things. You’ve probably heard the saying ‘buy low, sell high,’ but fear can flip that statement on its head. When we see a downturn and panic rises, we might wonder if we should just go to cash and wait it out. This can be detrimental to a financial plan. If we take the downside and miss the upturn, recovery becomes much more difficult.
CNN actually has a Fear & Greed Index that looks back over different periods of time to evaluate the levels of fear and greed in the marketplace. Keep in mind that this index is based on theory and consists of several indicators, so don’t take it at face value. (Link: https://www.cnn.com/markets/fear-and-greed)
Neil Diamond even has a song called “Fear of the Marketplace.” It’s a far cry from “Sweet Caroline.” I don’t recommend it, but if you insist (ads are not related to Longview):
It’s December 29th as I write this, and the one-year view of the S&P 500 Index isn’t looking very appealing. It’s a red line, and we’re not much above the low for the year. Take a look:
Pretty unsightly, right? This is where the fear factor can really set in. We see the downturn, and we worry. Or maybe we don’t. Maybe we realize that taking the “long view” is a better approach – one with less fear.
Now, let’s look at the same S&P 500 Index performance over a five-year period:
That’s a much more appealing result. Despite the 2022 performance, the market has climbed since the beginning of 2018. You were much better off remaining in the market during that time.
Neil, your thoughts
So, I invite you to join me as a self-proclaimed non-market watcher. I find myself harboring far less fear when I do. In the words of Neil Diamond:
Fear of the marketplace.
Just gotta forget the whole damn thing.
Thanks, Neil. I’ll do just that, and I hope you can, too.
Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.