There are endless tutorial videos on a number of subjects now. I saw one recently that’s my favorite. “How to Lick a Lollipop.” If you have 1 minute and 6 seconds you must watch it, it’ll change your life. Ok, maybe a slight overstatement.
To be clear my daughter does not have a youtube channel, but her advice is priceless, “...you do this…”, and she licks the lollipop. It’s not hard, it’s not complicated, and she gets rewarded. No need for her to learn the molecular makeup of the lollipop, no need for her to do any math… She licks and gets rewarded.
Enduring the pullback in the stock market is similar. You do this… you endure the pullback. It’s not hard, it’s not complicated, you don’t need to know every detail, no need to overcomplicate your life by trying to assess blame for who’s responsible for it… You just endure it, and for the last 100+ years, investors have been rewarded when the stock market inevitably comes back.
Overcomplicating matters by factoring in too much information and making too many decisions… is how NOT to endure a pullback.
Overthinking the political influence on the economy is a common mistake. We often hear of people making a direct connection between the President and the stock market. Some will assign total blame every time it drops and others give all credit when it goes higher.
An example of this was in the 90s. Clinton didn’t deserve all credit for the economic boom when the internet was invented, and today Biden doesn’t deserve total blame for the inflation and subsequent pullback were in. In fact, if the stimulus is largely responsible for the inflation we’re experiencing (which we believe), Trump pushed through more COVID stimulus than Biden did, however, Biden’s round of stimulus came late and seemed the most unnecessary.
Oil prices, interest rates, the economy, the stock market… who gets credit, and who’s to blame? As a voter, these things do matter and will matter in November, but as a long-term investor, they can be unhelpful to dwell on.
Watch less news, make fewer decisions, and think about the reward that’s coming when inflation abates. That would be Penny’s advice to us.
How can you endure this pullback? Put your phone down. Don’t investigate every day-to-day financial detail. Don’t wade into the endless financial news that can turn even a positive headline into a crisis, but look at the big picture and the likely reward that awaits us on the other side.
However, if you’re a stickler for details, here’s the plan for the accounts. We used some cash earlier this year to take advantage of this pullback and bought some stocks and funds we believe will go higher in the future. We now find ourselves getting close to making additional buys if the stock market drops even further.
This is our game plan every time the market drops. Buy some if the market drops; buy more if it drops even further.
The S&P 500 was around 4100 during our last buys and we’d like to wait until it’s down around 3600 to buy again. That would be a 27% drop from the beginning of the year and another 6% drop from where we are now.
We’ll be adding to stocks we already own like Wells Fargo, Ford, and Amazon, in the Growth Stock portfolio. For our Moderate Funds portfolio, we’ll be rebalancing into more of the S&P index to capitalize on the rebound in stocks that will come when inflation moderates.
Remember, there’s no need to dwell on every detail of the financial markets. If you find yourself struggling to stomach another tough monthly statement, call us, so we can help you see the big picture and point you towards the reward that’s coming.
Thanks for reading,