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Copyright © 2017 Lionshead Wealth Management, LLC

Dear Clients, Colleagues and Friends:
 

I recently took a vacation with my family to Los Angeles. We went to Disneyland, where my twelve-year-old daughter, Ella, had an itinerary filled with roller coasters for us. To beat the crowds, we got up very early and rode them at seven o’clock in the morning. Stomach churning is an understatement but luckily, I hadn’t eaten my breakfast yet.

The bad news is that this vacation was just this past Christmas, 2018. The real roller coaster was the stock market. As a market ‘pro,’ this ride had already begun, before we stepped foot in Disneyland as the market is open at six thirty AM in California. Day after day during the week, the market dropped fast - hundreds of points daily and thousands of points totally, only to climb a record amount the day after Christmas. This twisted into yet another three percent drop and four percent climb all in just the very next trading day. 

At this point, I will tell you that if you’re in this business like me and you’re trying to take a vacation, watching the market go down as fast and furiously as it did may ruin some of your fun. However, when you’re forced on to a super high-speed, looping twisting roller coaster, you are consumed by that, at least for the short (not short enough) ride. My favorite part of the ride was when it was coming to the final stop. The momentum had died down, the brakes were on, and I could relax knowing that we would glide into the station smoothly from here. I would get out of my seat, a little shaken but glad that the turmoil was over, until the next one Ella dragged me on to.

Apart from the obvious up and down nature (read: roller coaster) of stock markets, is there another reason to reference the coaster in this context? I offer that I could have simply sat them out, as my wife did, as an option. The Ferris Wheel works just fine, offers nice views, a calm pace and relaxing experience, kind of like bonds. With that on offer, why should I go anywhere near a roller coaster, or the stock market, let alone ride them?

I’ll start with the easy one. If I don’t ride the roller coaster, then I will find myself on the wrong side of an age-old mathematical equation: unhappy daughter = unhappy daddy.

But what would happen if you didn’t ‘ride’ the market and just go conservative with your portfolio? The short answer is that we invest in stocks primarily to pace inflation but also to grow the ‘purchasing power’ of the dollars invested over time beyond inflation. Simply put, no matter how old you are, you *should* have some money invested in stocks, which have provided the best returns over the longest time, historically. The longer answer is that this strikes at the heart of our role as advisors and the purpose of the investing activities we engage in on your behalf, as clients.

Each individual client has a different set of goals and resources. When we build your portfolios, there are many factors considered as to what and why you own the investments we have chosen (age, risk tolerance, amount, allocation, future obligations, goals, etc.). Owning some percentage of stocks has been a deliberate choice, for the long term.  Even retirees who are in their eighties will be invested in the stock market for a portion of their money, albeit small.
 

Now there is no question that some of the funds are down, substantially, since my last writing or our last phone call, no matter who you are. It is unsettling to see the numbers go down, full stop. It is also natural to question why it’s happening and to want a clearer understanding as to what impact it may have on you and your life.  You may wonder why we didn’t just sell all the stocks and wait out the ride.

Our first job, as your advisors, is to strive to ensure that there will be little to no impact in your real life from stock market declines like we are experiencing now. The numbers on your statements will decline and while it will be tempting to jump off the ride just as the wildest and bumpiest part is whiplashing, however doing so can prove dangerous and inadvisable. Imagine that you are already on this roller coaster. Trying to time the exact moments to safely jump off , and then back on, while the ride is going will make avoiding injury difficult to say the least. Timing the stock market to avoid any losses but still get in on the gains when times are good will prove just as hard to do. As I wrote this over January 3rd and 4th, the stock market first lost about three percent of its value, only to recover all of it the very next day.

The roller coaster will eventually come to the end of its track. It will stop, and return to the station for another go around. So, too, will it be with the stock market. In the meantime, you may want to close your eyes before the next turn and drop, and wait until the ride has come to a smooth point to open them again. Along the way, we are ensuring that all seat belts are fastened, all safety features are working, and the ride (and also your portfolio) is working the way it was intended to. Should you want to discuss any or all of this, please do not hesitate to call me directly. If I don’t answer, you may want to check the Ferris Wheel!

Warm Regards,

Scott Lasky, CFP

The ‘Roar’

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