We have been reminded...

We have been reminded of late, that sudden, sharp pullbacks in equity prices have not gone away.

Indeed, they have always been with us- just not lately.

Here’s a quick reminder on how to handle stock markets, talking heads on CNBC, and your next door neighbor who tells you he got out of the market three years ago!

  1. Remember not to pay attention to these sudden changes in the Dow Jones and S&P 500 index.

Out of the multitude of stocks that are in portfolios that are being managed for you, there are only 500 of them in the S&P 500, 30 rest in the Dow Jones Industrials, and a larger number forms the NASDAQ.

  1. We have gone 1,419 calendar days without even a 10% correction. This is the third longest such run in the past half century. We’re overdue…we’ve been preaching this for some time.
  2. Declines of 10% or more in one year have averaged at least once per year since 1928.
  3. The average intra-year decline in the Index since 1980 has, according to S&P, been 14.2%.
  4. While trends give certain signals as to what your portfolio is doing, you must remember that you do not own an Index Fund with our firm.

After many years in this business, and numerous conversations, we’ve met few professionals who spend time watching indexes, or “markets”. Their attention is focused more on the companies that they own and are researching, which may or may not be a part of the market you see represented in the index.

We are reminded during these times in the financial markets of what the late John Templeton called “among the four most dangerous words in investing”- that this time is different. We hope that if you are feeling even a twinge of that sentiment, that you take our advice which is based firmly on the totality of historical experience: “This too shall pass.”