INVESTOR BEHAVIOR IS VITAL TO SUCCESS

• Shouldn’t the market pull back here?
• Aren’t we overdue for a correction?
• Shouldn’t I wait until the market goes down before I initiate or add to my equity positions?

These are questions many advisors, us included, are hearing from their clients lately. And it is understandable- we all want to know the unknowable. We often joke with clients about determining their best Social Security strategy. If they could only tell us exactly when they will die, we promise to give them the absolute best strategy. It is the unknowable that often bothers us, and there is a belief in many of us that there is someone out there who can protect us from bad things happening. Somebody, somewhere, knows what is around the corner, if we could just find them.

In one of Warren Buffet’s recent letter to shareholders, he said “the years ahead will occasionally deliver major market declines-even panics- that will affect virtually all stocks. No one can tell when these traumas will occur.” And in talking about stock market forecasters who try to predict these unknowable events, he said “Heaven help them if they act on the nonsense they peddle.”

Bloomberg recently provided a lookback at the stock market since 1981. While the annualized total return of large cap stocks from 1981 through the end of 2016 has been 12.8%, the average price decline during each calendar year has been 14%. So on an annual basis, investors had to weather an average price decline of 14%. But most importantly to benefit from the stock market’s positive performance during that period, they couldn’t have sold their stocks in reaction to those downturns.*

Many of us remember the October 19, 1987 Black Monday stock market crash. The stock market dropped 22% in just that one day. If you invested $100,000 in the S&P 500 on Friday before the crash, your portfolio would be worth $79,540 the following Monday evening. And if you sold your stocks then, you would have taken a serious loss. However, by the spring of 1989 your portfolio would have surpassed the original $100,000 investment- if you stayed invested. Our emotions often tempt us to make bad decisions in the investment markets. As referenced above, investor behavior is vital to reaching your financial goals.

Success in investing is not a function of avoiding market downturns. It is a function of having a strategy and a discipline and sticking with it, even when it feels stupid to do so. With our planning process we make every effort to ensure that you are not taking any more risk than is necessary to help you reach your goals.

We have no idea whether the next 1,000 or 5,000 point move in the stock market is going to be up or down. The good news is that we are not at a disadvantage because neither does anyone else. History suggests that it is time in the market, not timing the market that has differentiated the winners and losers in the investment world. As Warren Buffet said “The most important quality for an investor is temperament, not intellect.”

Thanks as always for your trust and confidence in us.

Thanks,
Beach

Disclosure: *Additional information available upon request.

Views expressed are not necessarily those of Raymond James & Associates and are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Atlanta Sosnoff is an independent organization and is not affiliated with Raymond James. Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC