It’s official. Finally, the longest Bull Market in American stock market history was eclipsed last week. Are you surprised? We are not. I should point out that it occurred in the face of several headwinds, yet it happened on Friday, August 24, 2018. What we, as investors, should do about it is today’s subject. Perhaps the best answer might be to simply kick back and enjoy it.
As an independent, fee-only Registered Investment Advisory Firm (RIA), we have always been, and remain today, independent and unbiased with regard to the markets, our clients, and our investment strategy. This seems like an opportune time to review the process that drives our thoughts and actions as financial advisors.
Two fundamental emotions that drive investors are fear and greed. First, I believe that “greed” is one of the most abused words in the English language. According to dictionary.com, greed means “excessive or rapacious desire, especially for wealth or possessions.” This is not what we experience when meeting our clients and investors from every walk of life.
Investing, to us and to our clients, has little to do with greed. The desire for financial independence, and not the “excessive or rapacious desire, especially for wealth or possessions,” is the most common sentiment we see and hear. Fear is another story altogether, and is a valid emotion for investors. Anyone with a few miles on them has been through some really tough times in the financial markets. The mere fact that markets have historically recovered and gone on to new heights does little to erase that learned fear.
Emotions certainly play a role in most people's investing lives. Should they? Empirically, emotions shouldn’t influence our decisions. Data, facts, and statistics should overpower emotions. That, as the saying goes, is easy for me to say.
Understanding peoples’ emotions is critical to successful financial advising. Easing fears and controlling “greed” is our goal, and our best tool is simply a process of educating investors in the risks and rewards of investing in the world’s greatest capitalistic economy.
Is this market now at the top? We know that it is higher than ever before, and we know that the current Bull Market is the longest in history. A more thorough look at the past 9-1/2 years reveals a remarkable historical fact. This Bull Market likely has a long way yet to run. First of all, the market was driven artificially low during the “Great Recession” of the last decade, and in this ensuing economic and market recovery, progress was incredibly slow. Ipso facto, there is more room to grow.
It is not easy to look at numbers on the Dow-Jones Industrial Average, the NASDAQ Composite, or the S&P500 Index, and to accept them as “only numbers.” However, that is what they are – only numbers. For evidence, think back to when investors were concerned about the level of the “Dow” when it was crossing 16,000, then 17,000, 18,000, ad nauseum. It is only a calculated index number, and index numbers don’t drive the market. Economics do, and our economy is spectacular right now.
Van Wie Financial is fee-only. For a reason.