Intra-Year Declines

It is common for there to be declines in the markets throughout the year, sometimes even double digits declines.

This is to be expected.

As an investor, one of the reasons we diversify and modify our allocations throughout the year is to try to minimize these fluctuations.

What should you do when there is one of these expected declines? It depends on the situation at that time.

Please click on the video below for a 4 minute discussion I give on this topic……



Hi there, Mike Brady with Generosity Wealth Management, here in Boulder, Colorado. And I this week I want to talk about intra-year declines, and frankly, the correlation they have with the end of the year returns. Because, I talked about this just a little bit when I did my end of the year video (kind of beginning of the year video) where I said that on balance, I’m optimistic for 2012. And at that time I said, “listen, it’s common for there to be volatility,” but volatility has increased in the last couple of years and I believe that volatility will continue going forward.

It is common for there to be, within the year (intra-year), declines that we seem to forget after the year is over. Negative, kind of from the high to the bottom, within a year of you know, eight, nine, even double digits, but that doesn’t mean the year is going to be horrible. So as 2012 unfolds, we’re going to find some times where it’s not as high as it used to be, OK? That the market has declined, and that is part of the process, part of the journey and the travel. Now that being said, the reason why we diversify, and we adjust our allocations throughout the year is to try to minimize the impact that we have. But we know that it’s going to happen.

So the question that we ask ourselves at that time is, “why is this going down, you know, why is the market going down like that?” Is it event driven, where there’s a lot of emotion around it? Is it value driven? What’s the cause of it and at that time, do we believe it will continue to go down, or do we think that this is just going to be one of those normal, you know, fluctuations, and staying invested is the right thing to do? I don’t know what we’re going to do at that time, but I’m preparing you right now for that, you know, almost inevitability. OK?

I’m going to throw up on [screen] here… here are some intra-year returns and then declines and then the annual return. And you’ll notice even in the last two or three years, a twenty-eight percent decline in ’09, sixteen in 2010, and even last year there’s a nine-teen percent decline and it ended up the year, and that’s on the S & P 500, which is an unmanaged index, that doesn’t necessarily mean that the year ended on a decline.

So, you know, one thing I want to talk about is as well, that when I say that I’m more optimistic because I look at the value of the market and I believe that the prices are…, I believe it’s an underpriced market right now, that does not mean that I discount all of the negatives out there. The way I like to think of it is, there’s a scale, there’s all these things on the negative side, and all these things on the positive side, and which way is it going to tilt? And it is still acknowledging that there are negative things. And someone else, another analyst, might take the same data and say, “no, I’m going to weigh all the negatives a little bit more than the positives.” And so there are always positives, there’re always negatives out there and the question is- how do you weigh them? And which one is a little bit more than the other? And of course, you might adjust your opinion as the year unfolds.

So anyway, that’s one thing I wanted to talk about this week. I hope that you’re doing well. The Super Bowl was a couple of days ago, and frankly I’m recording this right as we’re going into the weekend so I don’t know who won but you do, so hopefully your team won.

Mike Brady, Generosity Wealth Management; I’m a comprehensive, holistic, wealth management firm, with tax planning, estate planning, investment management, retirement planning, I really try to do all of those in order to help my clients meet their goals. Mike Brady, Generosity Wealth Management-303.747.6455.

You have a wonderful week! I’ll talk to you later, bye bye now.





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