Don’t just do something, sit there. Yep, you read that correctly. I came across this statement (philosophy) many years ago while reading a book on mindfulness. The current market volatility, and the decisions we all can make in times like this, brought this statement to my mind.
In the course of some of my review meetings (calls/zooms), a few clients have said there is nothing to do, unless you want to SELL or BUY. But this mindset leaves out (or undervalues) the decision to HOLD. Make no mistake, HOLD is not inaction or indecision but rather an informed decision. A decision to HOLD, like those to BUY or SELL are part of the advisory relationship and a part of my day-to-day work our clients. I shared this with the few clients who had mentioned that there “was nothing to do”. Those conversations spurred me to write this.
No doubt the pullback the last few months has been rough. Inflation, housing shortages, supply issues, interest rates, Covid and the invasion of Ukraine are bad enough individually. But like other periods, and you don’t have to go back further than March of 2020 when Covid first arrived, we are regularly dealing with bad news. In 2008, we were being told markets were going to fully crash yet didn’t. In March 2020 as Covid hit, we were told the same. Each of these periods, as found on the chart below, could tempt someone to sell.
The foundation for any successful endeavor requires a plan. Our planning work anticipates these challenging times. Not the specific events or dates but their impact. And remember intra-year pullbacks happen every year. Over the last 42 years, the average intra-year pullback is -14%. Don’t panic when the market does. If this period is causing you to question your risk tolerance, either an increase or decrease, I am happy to discuss it with you.
On a positive note, this turmoil will present opportunities to put cash to work. For those with cash and time, a period like this can present attractive BUY opportunities. But don’t forget – holding is also a deliberate action.