If buying low is good advice, this could be the time
One of my goals with this column is to simplify the complex financial markets. Market technicians attempt to explain their analyses and forecasts utilizing data and graphs. But if you talk to fifty economists you’ll get 100 different opinions.
My simplest description of the current market is that it’s driven by fear and anxiety and teetering on the brink of panic.
We’re all reminded of that fear every time we pass a gas station. The posted price per gallon is an in-your-face reminder of how quickly purchasing power has declined. And not just at the pump, but almost everywhere we spend our hard earned money.
Toss in the rapidly falling values of investment accounts and it’s easy to understand why the financial mental health of so many can best be described as worrisome.
Whenever my emotions creep into my thoughts, I take a deep breath and reflect on two things; the history of the financial markets and today’s longer life expectancies. Historically, this is not our country’s first bout with inflation and market downturns. And although government officials initially characterized inflation as transitory, they now realize that it’s far more than a side effect of the pandemic.
In fact, it’s likely to be with us for a while, and it’s a stubborn, worldwide problem. From the late 1800s to as recently as the 1970s, our nation has been through the pain and discomfort of inflation. It’s something that never really goes away.
Historically, we’ve been able to manage inflation and keep the negative effects to a minimum. Unfortunately, there are no apparent signs that the initial steps taken by government officials have done anything to help it. Hence, the fear and anxiety continue to exist.
Account values are far from what they were at year-end 2020. Some blue chip stocks are doing better than the technology stocks that have plummeted. But they’re all well below last year’s highs. Likewise, most bonds are down and money in the bank is earning minimal interest.
Right now, in the middle of a substantial downturn, it’s difficult to find a ray of sunshine. But in down markets I remind myself how important investing is for the long term. Although there are no guarantees in life or finances, I’m optimistic that I will live deep into my retirement years. And I believe all investors should consider that time is on their side.
Few nest eggs are built by hitting the lottery or a windfall speculation. Letting your emotions take over and moving out of long-term investments in the midst of a downturn, however, can certainly ruin a nest egg.
History and my own optimism tell me that the financial sunshine will eventually reappear. When it does, many will regret that they bailed on their investments or missed the opportunity to invest more at deeply discounted prices.
I’m not calling the opportunity to “buy low” a ray of sunshine. But remind yourself that equity investments represent ownership. And right now, there are a lot of good, solid, profitable and innovative companies out there that are recalibrating to adjust for inflation.
I’m confident that somehow, some way, we will find our way through these difficult times. And, ultimately, investors will be rewarded for not fleeing from inflation and a difficult investment situation.
Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Society for Lifetime Planning is not affiliated with Kestra IS or Kestra AS. https://kestrafinancial.com/disclosures The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services,
LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.