“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” – Warren Buffett
Right now, no one knows how the financial markets are going to completely react to the Coronavirus epidemic and with this recent and most particularly painful downswing it is helpful to take a step back and refocus on the long-term. It’s moments like this that remind us why we keep diversified portfolios and that we shouldn’t make short-term decisions based on long-term goals.
Watch our video to hear more!
Mike Brady here. I am recording this on midday Tuesday, March 10. I’m going to get this out to you as quickly as I can get it through compliance. I’m going to continue with regular updates to you because no matter where I am in the world I’m always working and I’m always paying attention to things. You can tell that I’m in a hotel room right now as I spoke at a conference earlier this morning.
Very spectacular news. It’s kind of hard to miss it. It’s sort of like driving to the airport or being on a plane. Accidents happen all the time in a car so that’s a great risk to you, but what really makes the news is the spectacular nature of an airplane crash. In the last two-and-a-half weeks we’ve had quite the spectacular news – very huge volatility. In the world that is volatility risk adverse it’s really quite painful. Those that have a short-term vision or have a long-term plan but then see things through a short-term viewfinder, that’s not very comfortable. We can’t be that way.
You’ve heard me and I feel like I repeat many of the same messages over and over, but the better way to approach things is to look at things from okay, I’ve just given up and now I’m back to where I might have been ten months ago, eight months ago, a year ago, et cetera. But my path is for the next 10, 20, 30 years. My path is for the next five years, et cetera. That’s why you have diversified portfolios. Because things do happen in a three steps forward, one step back and sometimes two steps back. If there is no belief that things will be better in the future then you shouldn’t have investments to begin with.
When the market goes down that is many times for some people a buying opportunity. What’s interesting is that I’ve been doing this for almost 30 years and I hear so much of the same thing over and over again. That’s one of the unique situations that I find myself in is that I get to speak with investors and clients and professionals all the time and so I’m always listening to different perspectives. When the Dow Jones which is an unmanaged stock market index was at 10,000 points I heard that oh, no way will it go up to 12,000. Or when it was at 18, they’re like well, when it gets to 20 that’s going to be at a top or aren’t you concerned it’s feeling pretty much at a high, it’s pretty obvious. Or when it was at 21 or 22 or 23 it’s always at a top. Yes, we went all the way up past 29,000 and now it has had a pretty spectacular in a relatively short amount of time a decline.
That does not mean that we then go the other way and say well, it’s obviously going to go all the way back down. That’s why we have diversified portfolios. That’s why we have a long-term vision, a long-term plan, et cetera. Because on the way up we were always worried about it getting too high. Then it goes up, it goes down. Now we think it’s all going to go down and neither of them are true.
About three out of four years are positive. That means one out of four are negative. The question you might have is what’s my bias? Is my bias to be an optimistic person or a negative person? And optimism, in my opinion, is in your favor. Why have investments if you don’t believe that it’s going to be higher in the future. Why have investments if you need the money in the short term. You shouldn’t have it in the short term. You should make short-term decisions based on long-term goals and plans and things of that nature.
I was just talking this morning as part of the conference to this man who’s an ultrarunner. He’s about to do the Leadville 100 which is a 100 mile race. One of the things that was interesting about our conversation is he was saying hey listen, if I have a bad five miles I don’t give up the race. I’ve got a 100 mile race that I’ve got to run. If I’m 40, 50, 60 miles into it, no. If all of a sudden I start slowing and I walk, I don’t go backwards, I continue plodding along toward my goal. And I couldn’t help but think wow, that’s a good way to think about it because we are actually in a long marathon, a long ultra-run and not every mile goes the way we would like. Sometimes we stop and we take a little rest. Sometimes we might walk instead of run, but we always go toward our goal and it’s no different than what is happening right now.
I believe that a lot of what’s happening is computer driven. I think that once the big boys come back in, those people who are individuals handling billions and trillions of dollars, that’s when we will see the bottom of this particular market. I don’t know if that’s going to be tomorrow. I don’t know if that’s going to be next month, next year. Anyone who will say that they know how the Corona virus fear or concerns, preparedness, virus, et cetera, is going to turn out is lying to you. Anyone who says that they know how the financial market is going to react and the oil and this and that, all these things are going to play out the variables in the long equation are lying to you as well. Don’t listen to them. Don’t listen to the people on the news because most of the people who know something aren’t saying anything and those that are saying something don’t know anything. That’s just my belief.
Relax. That’s why we have a long-term strategy for you and these things happen. They happen periodically. This happens to be a particularly painful one and particularly spectacular very quick on the down, but these things do happen. I’m not sure that I would jump out the window yet.
My number is 303-747-6455, Mike Brady. You have a wonderful day. I will continue to update you as things go through over the days and weeks ahead. Thank you. Bye bye.