After a long period of relative calm in the markets, the increased volatility over recent weeks has resulted in renewed anxiety for many investors.
Since February, the US stock market has experienced some ups and downs resulting in many investors wondering what the future holds and if they should make changes to their portfolios. While it may be difficult to remain calm during a volatile stock market, it is important to remember that volatility is a normal part of investing. Additionally, for long-term investors, reacting emotionally to volatile markets may be more detrimental to portfolio performance than the drawdown itself.
The recent drop in the stock market has most people looking for answers. What is going on? Why have stocks dropped so much in such a short amount of time? Market-timers and short-term traders move markets in the course of hours, days, or even months, but we believe the long-term profitability of the companies we own is what drives long-term stock returns. We also know that the kind of movement we are currently experiencing is little more than noise that can safely be ignored. 10% declines in the market on average will happen every year. We have been insulated from this large a decline since the last drop in 2008-2009. There has been a long continuous run up since then with little volatility. In 2017, there were only 8 trading days when the US stock market went up or down by more than 1%. This low volatility and gradual positive gains may have lulled some into unreasonable expectations for stock market performance.
It’s not always easy to grasp the value of diversification—why, in other words, it’s better to own many stocks inside a mutual fund than one or two stocks on their own. But recent research conducted by Arizona State U. finance professor Hendrik Bessembinder offers some insight.
Bessembinder is not afraid of numbers. He calculated every one month return of every U.S. common stock traded on the New York and American Stock exchanges, and the Nasdaq exchange, since 1926. Even though nearly half of the 25,782 stocks that have been in existence over this time period lasted 7 or fewer years, this still accounted for 2,524,849 individual monthly returns from July 1926 through December 2015.
Update! Rescheduled! Tune in to Sirius Channel 111 on 1/23/2018 @ 6:20pm to listen to Ryan Vogel on Your Money hosted by Kent Smetters
Due to an unexpected illness, the radio show host had to reschedule the interview with Ryan Vogel for 1/23. Be sure to tune in then!
Private Wealth Management Group Senior Wealth Advisor and Partner, Ryan Vogel CFP®, will be a guest on the satellite radio show “Your Money” with Kent Smetters on January 23, 2018 at 6:20 PM. The show runs from 5-7 PM on Business Radio powered by the Wharton School and can be found on channel 111 via satellite on SiriusXM.
Business Radio features world-renowned and distinguished professors and alumni as regular weekly hosts, plus executives, entrepreneurs, innovators and other experts as special hosts and guests. Broadcasting from Wharton’s Ivy League campus and Silicon Valley, Business Radio covers every aspect of business in an informative, entertaining and approachable manner — from the biggest headlines of the day to the nuts and bolts of how to build a business from the ground up — with some shows offered via live, call-in format.
Ryan will be interviewed by Kent and then take questions from listeners on the topic of tax-managed investing and charitable giving. If you are a satellite radio listener, be sure to catch Ryan this evening on channel 111.
5:00pm - 7:00pm
Host Kent Smetters talks first with author Brian Tracy about his latest book, "Believe It to Achieve It"--including how to set the right kind of goals, financial and otherwise. After that Kent welcomes two certified financial planners, who help him take calls from listeners who need personal finance advice.
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