The stomach-churning ups and downs of the global financial markets coupled with unprecedented economic uncertainty have created an environment to test the mettle of even the most seasoned investors.
During a bout of market fluctuations in 2018, Vanguard CEO Tim Buckley advised clients: “Although volatility can test investors’ nerves, we sometimes think of this as ‘Vanguard weather’—a time when having a disciplined, low-cost, and long-term approach to investment management serves investors well.”
Simply put, Vanguard weather underscores the value of our principles for investing success. These precepts have gained countless converts around the world. Why? They’re both simple and proven over time.
A different way of investing
Vanguard clients aren’t only adopting these principles, they’re advocates! Here’s a sampling of their comments. Hopefully, they’ll help you maintain perspective and manage your portfolio during these trying times.
- The majority of your lifetime investment returns will be determined by decisions you make in a small minority of time … this is one of those times. Keep doing what you were doing last month.
- Time in the market beats timing the market. The sooner you start, the better off you’ll be!
- Dollar-cost-average your way through the volatility and you’ll be fine! Don’t panic and be patient.
- I’ll leave the plan as determined and wait for the storm to pass.
- Here’s what I do: Nothing. As long as my investments are in line with my strategies, I don’t concern myself with what the market is doing.
- There are two immutable truths that have served me well when it comes to investing: 1) I can’t predict the future and 2) neither can anyone else.
- Always keep in mind that the market will come back. Slow, steady, and boring wins when it comes to investing!
- It’s important to tune out the head noises, take a deep breath, and focus on your long-term goals!
The value of guidance
Other investors recognize they need help and are seeking the reassurance and guidance of a financial advisor, as these comments demonstrate:
- My advisor spoke twice with me during the past two weeks to calm me down, showing me how we prepared for a down market. Even with my very conservative allocation, I believe, I would’ve sold everything when the Dow went down.
- The biggest investment risk is behavioral risk. If paying a little for a decent advisor can defuse that risk, then it’s absolutely worth it.
Investors are walking the talk—and you can too
According to a new report, Vanguard researchers found that while transactional activity was elevated, more than nine in ten Vanguard U.S. self-directed individual investors have “stayed the course” and not traded in response to the market decline. Indeed, taking no action may be the best course of action. If you feel compelled to do something, consider harvesting a loss for tax purposes, rebalancing to your target allocation, or increasing the amount you regularly commit to your investment accounts. Wealth, however, is nothing without health. If I may offer some advice: Follow the prescribed health agency and government protocols, use common sense, and practice social distancing. Stay safe.
Note: The quotes from our clients were edited for clarity, brevity, and grammar.
All investing is subject to risk, including the possible loss of the money you invest.
Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you carefully review the terms of the consent and consult a tax advisor before taking action.