Stock Market Volatility
1. with the recent price swings you be getting a little scared of the markets and wonder if another 2008 is upon us.
2. we do not know for sure but let’s review a few a things.
– The large point drop in the DOW of nearly 1600 points was large at 6.26% but not the largest in percentage terms
on 8/24/15 the dow saw a 1089 point drop or 6.6%
– 5/6/2010 saw the flash crash with the DOW Dropping over 9%.
POINT: it is not the down days that define the success of an investor. It is staying in for the good days. I.e. remove the top 10-20 days and things really do start looking bad, but you need to stay invested.
– On average we see in an intra-year drop from peak to trough of 13.8%.
2. It is your stock/Bond/Cash ratio that best explains your return and volatility over time at over 90%.
– If you were extremely nervous perhaps we need to have a conversation about your capacity for risk and risk perception.
– It may be time to change your longer-term allocation.
3. We use a disciplined approach to match your portfolio to your goals. Accomplishing your goals is really what this is all about any.
– Matching your investment portfolio to your goals.
– How to use a bucketing methodology.
We use an academic approach to factor-based investing
1. Stocks outperform bonds over time.
2. Small-cap stocks outperform large-cap stocks over time.
3. Value stocks outperform growth stocks over time.
4. Profitable stocks outperform stocks with low profits over time.