It’s important how we measure market results

Recently, we have seen our financial markets enjoying a few days of significant decline. As markets advance, news reports seldom mention the progress being made. But when we have market declines, we hear terms like crash, plunge, and sell-off. I suppose these terms apply most to investment traders; but for investors, market declines present opportunities.

Many of us enjoy shopping. Discounts and sales always make the experience even more fun.

When you see discounts of 25% or more, don’t you feel like you are getting a deal?

Over my years working with investors, I watched as my most successful investors reacted to market fluctuations. When markets ran up, I saw them pleased; but not expecting that each new day will bring a higher value. When markets have declined, I’ve seen them looking for bargains and moving to take advantage.

In the last 12 months, the Dow is essentially even, in spite of all the turmoil of 2020. The Dow is the most often quoted index. Market commentators refer to the Dow because the performance of the 30 companies included in the Dow are supposedly reflective of the overall US economy.

Listening to the financial reports becomes much more interesting when you have money invested.

Most of us that have investments do not own the Dow, but instead investments from our work retirement plan, investments we did on our own, or investments we inherited.

Earlier this year, we had a significant market decline. Prices today are over 40% higher than the prices we saw in March.

One of the most interesting disclaimers of the investment industry is: “past performance is not indicative of future results.” This statement is everywhere. Of course, it’s true. The future is a human unknown, only predicable by us, after it has happened.

But maybe you have heard people say, it won’t be exactly as before, but it will rhyme.

We developed “props” to help our investors understand the importance of time. One was a ruler. You know, the 12-inch version of a yardstick. On the ruler, we printed “Measure your trip with an odometer, not a ruler.”

Think of the drive to your cousin that lives in Arizona. Measuring that trip with a ruler. Are you nuts? Who is going to be by the side of the road, flipping a ruler, for even 10 feet.

Don’t measure investments for your future with today's prices alone. Remind yourself that our economy has always had change, progress, and growth.

Ask yourself, will we ever be able to have confidence with our saving and investments, so that working each day can become an option?

Will we get to a place where we don’t have to work? If we’re ever going to get to yes, we’ve got to be saving and investing now.

Another way we tried to tell the story, was with tiny bricks. We got kiln fired bricks just like those used to build a brick house, but much smaller. Like the size of a Lego. Well, maybe just a bit bigger. Printed on the brick “One in Four. Ask me why?”

The answer, one in every four years or so the markets have declined.

If you have investments with us and the markets decline, it might make you unhappy or maybe angry. Maybe angry enough to think about throwing a brick through our window. We made it a small brick to make it hard to throw and so that it’s not big enough to hurt anyone.

But in fact, don’t even throw it. Instead, bring it into the office. When you do, have a rubber band wrapped around the brick and slip a folded check inside the rubber band.

Adding to your holdings when prices make you a bit uneasy is a proven way to buy on sale.

Right now, you’re sitting on more than you should in savings gathering dust. It’s hard to get ahead on dust.

Now that prices are more attractive, it’s time to take advantage. The best time to invest is when you have the money available.

Until next time, enjoy the ride.