Our 45th president was sworn into office
The Federal Reserve raised interest rates – 3 times
Hurricanes ravaged Texas, Florida, Puerto Rico and the Caribbean
The first major tax reform in over 30 years went into affect.
Las Vegas witnessed the deadliest mass shooting in US history
North Korea tested a hydrogen bomb and missiles capable of reaching the U.S.
NFL players protested, solar eclipse mania swept the country, terrorist attacks, suicide bombers, wildfires, earthquakes, and much more.
2017 was quite a year in the stock market too.
The Dow Jones rocketed 25% breaking 25,000 for the first time
The S&P 500 had it’s best year since 2013 increasing 19%.
The performance 2017 posted is not unusual. What is unusual was the market’s steady increase without even one meaningful pullback , which is rare.
In fact, this is now the longest number of days the S&P 500 index has gone without a 5% dip … ever.
2018: What to Do Now
With 2017 behind us, investor’s emotions are moving from the excitement seeing their account values increase to fear of being able to KEEP these profits.
Buy-and-hold investors first experienced the fallacies of traditional investing after watching their life savings sliced in half during the market meltdowns of 2001-2002. It then took the markets 7 years to finally return to previous peaks set in July of 2000.
But investors had little time to celebrate as prices plummeted once again with little warning during the financial crisis of 2008.
When the dust settled and markets bottomed in February 2009, investors were in shocked to see index values return to levels set 13 years prior in September, 1996. Through all of the ups and downs, markets were right back to where they started.
Click on the chart below to see an expanded image
Source: Yahoo! Finance S&P 500 ^GSPC
I recently met with an investor who expressed his current fears of reliving past events as he described his experience during the 2008 decline:
“IT HAPPENED SO FAST I DIDN’T HAVE TIME TO REACT. I WAS NUMB AND BEFORE I KNEW IT, LOST HALF OF MY LIFE SAVINGS FOR THE SECOND TIME. I CANNOT AFFORD LOSSES LIKE THAT AGAIN.”
After meeting with hundreds of families over the past 20 years I’ve learned majority of individuals make investment decisions based on how they FEEL.
When things are good, they see no reason to make a move before something happens.
But when market’s inevitably decline, they will do just about anything to ease the pain after the event has already occurred.
How to Prepare
“A rising tide lifts all boats” is a popular saying which in market terms means as the market moves up, most all investments do as well, and vice versa.Right now everyone is focused on how much their investments made last year, but the true value is by being able to protect these profits when the tides turn.
The stock market has changed. The factors affecting markets today did not exist when traditional methods were introduced.
Based on new factors and fallacies in traditional methods, many investors have adopted an updated approach designed to use the market to their advantage rather than fearing what the market may do next.
1. Align with market conditions as they change
2. Focus on growth during times of strength
3. Protect and defend in times of weakness
1. Instead of Buy-and-Hold they rely on Buy-and-Adjust
2. Instead of Asset Allocation they utilize Adaptive Allocation
3. Instead of Diversification they increase holdings showing strength and eliminate those displaying weakness.
We live in a state of “updating” just trying to keep up as our world changes. We update our cars, our computers, phones, and homes to help improve the quality of our lives.
But yet, the majority of investors have NEVER updated their portfolio approach.
At this point you have a decision to make:
1. Do what you’ve always done, and get what you have always got or
2. Choose another path
Disclaimer: This newsletter is a publication dedicated to the education of individual investors for informational service only. The information provided herein is not to be construed as an offer to buy, sell or hold a stock of any kind. All economic and performance data is historical and not indicative of future results.
There are many factors that affect investment performance including, but not limited to, general economic and market conditions including market volatility. There can be no assurance that these factors will affect future investment performance in the same manner as historical performance. All investments involve risk of loss. There can be no assurance that a portfolio will achieve its investment objective.
Advisory services offered through Enhance Wealth, a member of Advisory Services Network, LLC, 6600 Peachtree Dunwoody Road, Embassy Row 600, Suite 575, Atlanta, GA 30328. 770-352-0449 Insurance products and services offered through Enhanced Capital, LLC. Advisory Services Network, LLC and Enhanced Capital, LLC are not affiliated.