When The Ball Bounces Funny
So football’s back, and all’s well. Every Saturday morning, it’s chocolate chip muffins, coffee, and College Game Day. It’s beautiful. And a close second in entertainment value for the boys is watching their mom digest the game. “Why do they just run into a pile and then stop?” “Where’s the ball?” “Why did he just kick the ball to the other team?” And my favorite, “Who won?” The boys and I do have fun at her expense, I must admit. But despite all the questions she has, she’s a gamer.
She’s decided that she doesn’t have to understand the game in its entirety to appreciate its value to the family. She knows she can ask us a question if she needs help with anything and understands that losses come with the territory.
To her credit, she lettered four years in soccer. And while football’s not her sweet spot, she may be wise beyond her years. For just maybe, some version of her approach in dealing with football could be applied to market volatility? In both football and the stock market, it appears, at times, that so much is riding on the day’s events – when that’s likely not the case. Are you planning on retiring Monday? No? Then how the markets fared on Friday is likely of little long-term consequence. The market, like your team, will perform well on some days and poorly on others.
But your hope lies in that steady progress is made over the long term.
And despite your crimson colored glasses, you know you may have to experience a loss here and there. You knew that to be a possibility before you signed up (or were born) as a fan or as an investor, right? No one is comfortable with losing. Culture sure isn’t. It’s all about gaining. All about winning.
But even with a rock-solid game plan, there are no guarantees – particularly in a game where the ball bounces funny or in a market where volatility rules the day.
As history has shown, a loss does not a season make. (See: Ohio State 2014, Alabama 2011, 2012, Florida 2006, 2008, Colorado 1990, and a 2-loss LSU national champion in 2007) Losing a few games didn’t cause you to give up on football, did it? (Disclaimer: If your team loses its first game to the Rainbow Warriors, however, you could make a case for it. Go Buffs. I digress.) Nor, in my opinion, should you give up on the stock market, or your advisor, necessarily, when you see drops of several hundred points over several months or days…or even over the course of one day. What if you had pulled all of your money out on March 9th, 2009, and just said, “Fooey on the market!” Well, without pulling out my charts, let’s just say you’d have missed out on some pretty large gains. You would have punted on first down.
Bottom line: Short-term setbacks are not inextricably tied to long-term failures.
You may say, “That’s great and all, but this isn’t a football game. This is my retirement we’re talking about, and I’m not getting any younger.”
Point taken. And there may be times when a different play needs to be called. When the market’s volatility is just too much for your constitution, reconsider the risk you’re taking in your financial plan. You may even be taking more risk than your plan calls for? If that’s the case, then call an audible. If you do reduce risk, however, know that you may be limiting your gains. You’re deciding that the pain of losing is greater than the joy of gaining. After careful consideration and counsel with your financial advisor, you’ll decide on which play to run. And good for you. But don’t just give up on the game because of losses or uncertainty, you may miss out on a beautiful ending.
