If this feels so bad, why do we keep doing it?
These have been difficult days. That was a bad quarter, and it’s been a bad year. This is what these things look like, or more importantly, this is what these things feel like.
While the causes for market declines, bear markets and even recessions vary and each one is unique, how they feel is always the same. Feelings of financial loss mixed with fear, helplessness and the seemly injustice of it all lays upon our thoughts much too long.
A common response, we know from investment studies and our client conversations, is that after a quarter such as this, about half of all investors simply take a break from opening their statements. For the few brave enough to open their statements, their review of the pages is slight. So for you, wise and brave investor that you are, congratulations on opening the envelope and getting this far.
I would encourage you to keep reading and while you will see that, yes, your accounts have declined, you will also see that your needs from these funds are likely as easily met as before this quarter. What we desire from the investment experience is not an absence of volatility, but rather a continuation and possible advancement of our buying power. Here at Iowa Wealth Management, we are not aware of any of our model equity holdings announcing a decline in their dividend rate. In fact, we have experienced increases in those dividends, especially among energy and pharmaceutical holdings. Volatility is what we accept, tolerate and endure so that we can receive the benefit of being long-term investors.
It feels bad, sure, but is it?
Certainly not for those still using household and portfolio free cash flow to buy or add to their investment portfolio. For those investors (which would be almost all of IWM’s clients) portfolio income is increasing even as prices for new purchases have declined. Those investors are buying future portfolio income at reduced prices. As Warren Buffet is fond of saying, “Headlines that read, “Investors lose”, should be rewritten to “Investment buyers win”.