Three things others will wish they had done – that we’re already doing!

I hope this letter finds you well – and especially, healthy!

As you know, the coronavirus situation continues to hammer the markets. All over the world, investors large and small are facing a level of uncertainty we haven’t experienced in over a decade. But I’m proud to say
that, based on the conversations I’ve had with you and my other clients, there may be no group of people in the world who are handling this situation better. Because we were already prepared for a downturn, and
because we are now “playing defense” with our portfolios, my clients have all told me some variation of the same thing:

“I’d rather the markets were going up, but I’m happy that I’m sitting out the worst of this downturn.”

I was also proud when a client asked me a very simple, but very smart question the other day:

“When this is all over, what will I wish I had done?”

This question really got me thinking. Despite having lived through some major downturns over the years – the financial crisis of 2008 comes to mind – most investors still use the same “buy-and-hold” approach that
failed so badly during the last bear market. I think there are two reasons for this. First is that, until February, investors were enjoying the longest bull market in history. The longer the bull market, the more investors get complacent, which means most were simply not ready for things to go south.

The other reason is that, over the decades, the media has conditioned investors to think of “buy and hold” as the default investment strategy. As a result, most investors simply don’t know there are alternatives.
So. When the coronavirus pandemic resolves and the markets rebound, what will the average investor wish they had done?

Here are my answers:

1. They’ll wish they had focused on the numbers instead of predictions.

If you listen to the talking heads on TV, you’ll hear a lot of predictions about when the markets will recover. You’ll hear how investors should just wait things out, because eventually the markets will
recover. And it’s true – the markets will recover eventually. But once the coronavirus situation ends, things won’t just magically return to normal. It can take months, sometimes years for the markets to recover what
they lost. It can take investors even longer.

For example, let’s take a hypothetical investor with $1,000,000 in his portfolio. A bear market hits, and his portfolio loses 40%. Now, his portfolio is worth $600,000. Twelve months later, the markets have “recovered” and gone up 50%. But has this investor recovered all that he lost? No! He still only has $900,000 in his portfolio, instead of the cool million he started with.

The numbers don’t lie. It’s far better to skip market downturns then to weather them.

2. They’ll wish they had taken precautions before a crisis instead of after.

Have you ever done any disaster planning with your family? If so, you know how important it is to have hard conversations about what to do in the event of an emergency. If a fire breaks out, what do you do? If an earthquake strikes, where will you go once the rumbling stops? These aren’t pleasant things to consider, but they’re a vital part of keeping yourself and your family safe.

The longer this pandemic goes on, the more investors will wish they had these same conversations about their money. They’ll wish they had asked themselves, “How much of a loss can I really afford? What will I
do if my portfolio drops below a certain point? If the worst happens and the markets crash, how will I preserve something for the future?”

It’s never too early to ask these tough, unpleasant questions. But it can be too late.

3. They’ll wish they had a plan in place for going back on the offensive.

Here is what often happens during a bear market. Eventually, many investors will get tired of the “holding” part of buy-and-hold. Bruised, battered, and sick to death of seeing all the red in their portfolio, they’ll wave the white flag. They’ll decide investing isn’t for them. They’ll leave the markets altogether. This is what happened after the financial crisis in 2008. Many investors missed the bull market that followed, because they were too exhausted from wrestling with the bear.

As you know, we don’t believe in fighting bears. We do believe in bull-riding when it’s time to do so.

“The trend is our friend,” as the saying goes. Just as we exit the markets when they trend below a certain point, we’ll get back in the markets when they trend above a certain point. But many investors don’t know how to do this. They have no plan for going back on offense. The result? All bear, no bull.

But here’s the good news, When this is all over, we won’t be wishing we had done these things. Why? Because we’re already doing them! We have already gone on defense. We’re already focusing on the
numbers, not stories, predictions, or tired-out dogma. And we already have a plan for how to grow your money – when spring returns to the markets and growth is possible once again.

So, when this is all over, we won’t need to look back and regret. All we’ll need to do is keep looking forward.

if there are any parts of your financial life that we haven’t factored into our planning or are exposed to what’s going on in the markets, let’s have a conversation about moving them to defense. And ofcourse, if you have any friends or family who are already wishing they had done something different, please feel free to share this letter with them. Or, simply let them know that my team and I are here.

At a time when there’s so much confusion and uncertainty in the world, let them know that we can help.

Cliff M. Robello, CFP®, ChFC