History lessons
PRESENTATION SLIDES
History lessons
If you ask what the markets are going to do, the answer would be that they are going to fluctuate! Volatility can feel like the ups and downs of a rollercoaster. While we know that past performance is not indicative of future results, when it comes to behavior of markets, patterns often repeat themselves. Circumstances may change but patterns rarely do. History lessons is a walk down memory lane to see where we have been and a peek around the corner to see where we may be going.
In this session we will use data to answer the following questions:
- What does the history of market returns tell us?
- Is diversification dead?
- Is there a wrong time or right time to invest?
- What do inflation and rising rates mean for my life and my portfolio?
- What do I do now?
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Investors who abandon stocks in a downturn may miss out on their eventual recovery
One of the most difficult things for an investor to do is to avoid panicking during a market downturn and selling stocks when they’re at their lowest point. For example, many investors abandoned stocks and moved to bonds or cash during the worst of the 2008/2009 financial crisis, when staying invested would have provided the best outcome over the long term.
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The markets can be unpredictable
Diversification helps ensure that you don’t own too many of the worst-performing asset classes. Flyer shows equity markets on one side and fixed income markets on the other.
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Sequence of returns
The sequence of returns may have less of an impact on the portfolio of someone who is still working and accumulating assets for retirement; however, during retirement, the relationship between an individual’s rate of withdrawal and the sequence of returns can have a dramatic impact on a portfolio’s overall ability to last. It’s important to understand how returns and withdrawals may affect your portfolio.
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Stocks have outpaced bonds and inflation over time, despite a litany of volatility-inducing events
Flyer that depicts the impact of time and events on stocks and bonds.
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Let logic, not emotion, drive your investment decisions
Our emotions naturally make it difficult to make smart investment decisions, such as buying low and selling high. In reaction to stress, the reasoning part of our brain tends to shut down and survival instincts kick in. That’s why many investors sell during market declines—thereby locking in losses—and return only after stocks have recovered. Research suggests that these behavioral biases are a key reason why the average investor underperforms the market.
FLYER
Emotional rollercoaster
It is natural to feel emotional about your investments, this illustration shows the cycle of emotions and how they change your perception of investing.