Don’t Be Surprised by the Inevitable Down Days
“The only sure things in life,” the saying goes, “are death and taxes.” If you’re invested in the stock market, you can add one more item to that list—volatility.
This past quarter was a prime example. It ended with a new peak for the market, but getting there was a bumpy ride.
July saw the S&P 500 reach an all time high mid-month, followed by a roller coaster (which generally went more down than up), and ended with an encouraging uptick. But then August began with a week of significant drops, which turned to steady gains in the last few weeks of the month to end near July’s peak.1 September seemed like deja vu as a correction early in the month changed course to end the quarter at a new high.2
After the dust settled, the S&P 500 had posted a 4.1% gain for the quarter, and a 17.2% gain for the year-to-date.3
Now that the quarter’s over, it’s possible to look back and say, “That was pretty good.” But if you were among those investors who were closely monitoring their portfolios, it was not pleasant to see those days of losses. Even if they were just on paper.
Unfortunately, among active investors who tried to mitigate the volatility by jumping out of the market during losses and back in again during gains, the quarter would not have ended so well. The unpredictable nature of the market means that it’s impossible to tell ahead of time what will be a little dip and what will be a major drop. The same goes for trying to time when equities will start to “win.”
Airline pilots know to expect turbulence. Freighter captains are prepared to sail through rough seas. And prudent, long-term investors know that volatility is inevitable. It’s simply something you routinely expect.
There’s an oft-quoted proverb that puts it succinctly: Volatility is the price of admission to the market.
Wealth manager and financial writer Ben Carlson makes this comparison: “The price of admission to Disney World is long lines, crowds of people, sore feet from all the walking, subpar food and exorbitant ticket prices that defy the laws of inflation each year.
The trade-off for all of that stuff is creating wonderful memories with your family, some good beer at Epcot, a handful of good rollercoasters, ear-to-ear smiles for your kids and a family photo or 12 you can look back on fondly for years to come.”4
Your price of admission to the stock market will include days or weeks where your portfolio drops in value. It can be disheartening, especially as you’re expected to continue to add money each month. But in return for your willingness to endure this regular volatility, you gain the chance to participate in what has been for more than a century the most effective wealth-building and retirement-funding opportunity
available.
One key to coping with volatility is to recognize that it’s beyond your control. You can’t do anything to avoid it or maneuver around it. It’s unpredictable—except that you can always expect it in the future.
In fact, it’s just one of many things you can’t control in your life. And once you come to that realization, it makes for less worry. Amy Morin, writing for inc., says that many people cannot accept the brutal truth that they have no control over many things that happen in life.5 So instead of accepting that there are many things they cannot change, they try to fool themselves into thinking they really are in control of
everything.
“They think that if they can gain enough control over the people and situations they find themselves in,” she writes, “they can prevent bad things from happening.”
As an investor you don’t have to look too far to find things to worry about. In your news feed is story after story of national and global situations that threaten to wipe out the market and your nest egg along with it.
Unfortunately, when your coping mechanism is to grasp for control, you often end up causing more harm than good to your long-term progress toward retirement.
The solution isn’t to pretend that bad things can’t happen. But instead to focus on what you can always control: your response.
The great stoic philosopher Epictetus expressed it this way, “When something happens, the only thing in your power is your attitude toward it. It is not the things that disturb us, but our interpretation of their significance. Things and people are not what we wish them to be nor are they what they seem to be. They are what they are.”6
A great way to see things for what they are is to get a trusted, outside perspective. That’s a role your trusted advisor is happy to fill for you.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020
Sources:
1. https://www.spglobal.com/spdji/en/documents/
commentary/market-attributes-us-equities-202408.pdf
2. https://www.spglobal.com/spdji/en/commentary/
article/us-equities-market-attributes/
3. https://www.spglobal.com/spdji/en/indices/equity/
sp-500/#overview
4. https://awealthofcommonsense.com/2022/08/the-
price-of-admission/
5. https://www.inc.com/amy-morin/6-ways-to-stop-
worrying-about-things-you-cant-control.html
6. https://www.azquotes.com/quote/850822
Disclosure: This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Fiduciary Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.
