Our last communication stressed the importance of staying the course and not reacting to the market swings (although, admittedly at times the swings are enough to make anyone wince).
The chart below helps to demonstrate what could happen if investors pull out of the markets during tumultuous periods and miss the early days of market recoveries. Specifically, the chart illustrates that if an investor put $10,000 into the S&P 500 on January 1, 1980, and let it grow until March 31, 2020, the investment would be worth close to $700,000. If, instead, the investor missed only the five best days, the investment value would have dropped by more than $260,000. Missing ten days would cost close to $380,000, missing 30 days over $590,000, and missing 50 days would cost almost the entire investment of over $640,000. Of course, missing the market’s worst days in history would improve an investor’s return. However, timing the market with such precision is difficult and risks the possibility of missing the best days.
The underlying message remains the same: stay focused on your long-term strategy. Your GW & Wade Counselor set your allocation with your objectives and risk tolerance in mind, taking into account performance in up markets and weathering the down markets.
It is virtually impossible to time the market over an extended period. We continue to believe that investing for the long term while managing volatility is truly the best path to achieving optimal financial outcomes.
In the meantime, we are here for you. Please feel free to reach out to your Counselor or contact us with any questions or concerns. We also extend an open invitation to family members, friends, and colleagues who might appreciate our perspective.
Chart Source: Fidelity
Investment advisory services offered through GW & Wade, LLC.
The information provided above is the opinion of the author, general in nature and is not intended to represent specific investment or professional advice. No client or prospective client should assume that the above information serves as the receipt of, or a substitute for, personalized individual advice from GW & Wade, LLC, which can only be provided through a formal advisory relationship.
The figures shown above represent historical results. Past market performance is not a guarantee of future results. The investment products mentioned in the above article may not be suitable for all investors. All investments carry the risk of loss, including the risk of loss of principal invested. Some alternative investments strategies are private investments, which have limited liquidity. Diversification and asset allocation do not ensure a profit or guarantee against loss.
The charts are for illustrative purposes and are not indicative of any actual investment. Investments cannot be made directly in an index. The index returns represented in the article above are provided gross of fees. Advisory fees, compounded over a period of years, will reduce the total value of a client’s portfolio. For most clients, GW & Wade assesses advisory fees on a quarterly basis in arrears and deducts the fees directly from a client’s account. To the extent that such fees are deducted on a quarterly basis, the compounding effect will increase the impact of such fees by an amount related to the account’s performance. For example, accounts with a 1% annualized fee that is deducted quarterly and a 10% gross annual return, generally will have a net annual return of 9%. If those same accounts experience 10% gross annual return over five consecutive years, the compound growth would result in a cumulative five-year return of 61.05% but after accounting for the 1% annual fee, the compounded overall return would be 53.86%. GW & Wade’s advisory fees are described more fully in our Form ADV Part 2A, available here.
Clients of the firm who have specific questions should contact their GW & Wade Counselor. All other inquiries, including a potential advisory relationship with GW & Wade, should be directed to:
Laurie Wexler Gerber, Director of Marketing
GW & Wade, LLC