Enjoy this week's edition of the Planner's Beta
Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.
Something from Nate
It is ok to feel afraid, and let's look forward to a better tomorrow. If you are scared, you have reason to feel afraid. It is ok to fell that way. This past week we saw the President announced a state of emergency. The WHO announced we are in a pandemic. And, last week we saw markets decline into a bear market (a 20% decline in market value from its high). These drops signify the end of the longest expansion in U.S. equity markets. For many of us, we feel we are not in control. Our and our loved one's health may be at risk. And deep down, we think it may get worse. The truth is it can get worse, but it can get better. For most of us, we want to take action today. And we can see this play out in supermarkets across the nation. We want to take action because we face an uncertain future. We gain a sense of security because we are doing something to improve our future and to put our minds at rest. However, we need to make informed decisions. The past can help us understand what may play out in the future. As they say, "History tends to repeat itself." Financial planners are students of history. We study the past to try to understand what the future may hold. And although we do not have a recent pandemic to help us understand what may happen in the future, we have a recent global event that helps us understand what may be in store for the future. In its essence, this situation is different (a pandemic is a human vs. nature conflict, instead of a human vs. institution conflict). But history does illustrate what happened when a system was under severe stress. I was a student, earning my undergraduate degree in finance, while the 2008 Financial Crisis happened. I remember watching the news, and I remember there was a lot of worry, stress, and fear. And there was reason to be afraid. Some markets lost nearly half of their value during the year and ended down more than 30% on the year. There was a risk the entire banking system was going to freeze (or collapse). It was a rough year. After the Financial Crisis, the recession came. Unemployment increased to 10%, one of its highest readings in the past 50 years. Students had a hard time finding work. Homeowners lost their homes. People were out of work. However, with time, things did get better after the Financial Crisis. Unemployment recovered (reaching less than 4% in recent years), and the markets rewarded long-term investors. If one was so unfortunate, and invested in the stock market at its peak in October of 2007 and held their positions through the crisis, their portfolio recovered by March 2012. And if they invested in a portfolio which included bonds, the portfolio recovered even quicker (Source: JP Morgan On the Markets, Feb. 2020). Since the Financial Crisis, we saw the longest-running bull market in U.S. history. So what can we learn from this experience? What are some things we can do now? First, if you do not have an emergency fund, start one today. Most bear markets follow with a recession. And as we hear in the news, industries hard hit by the pandemic are already scaling back operations and hours. Less work will mean less income for many families. An emergency fund should include 3 - 6 months of essential living expenses. An easy strategy to increase your success at creating an emergency fund is to open a high-yield, FDIC insured savings account, where you automatically contribute a certain amount of your paycheck to that account. Second, do not make hasty changes to your investment accounts without clearly understanding the potential consequences. You were likely investing for a reason. Remind yourself of your goals and why you are saving. Uncertainty and risk are ever-present in the world of investing. Now is a time to learn and reflect on your feelings about the shifts in the market. Review your financial plan. Investors' financial plans should dictate when to make changes to their investments, not the daily movements of the markets. And last, talk to people. Finances and investing aside, the news and the state of human affairs are not very cheery. Don't internalize all the bad news. Reach out to a trusted friend, family member, doctor, or therapist if you need to talk to someone. Feel free to place a meeting on my calendar, if you need someone to talk about your situation. Unfortunately, things can get worse. But things can get better. Focusing on what you can do today is essential. Let's all keep our eyes on the horizon and continue to work hard for a better tomorrow.
Something about Pursuit Planning and Investments, LLC
Did you know I offer 100% virtual services? I purposely designed this firm for convenience and accessibility for my clients.
I conduct meetings via an encrypted video conference call with clients
I collaborate with clients between sessions via text, phone, and email
I use leading financial planning software to work with clients on their pressing issues via a secure web portal
My calendar is available via a cloud-based scheduling system, making it easy for clients to schedule a meeting when problems arise
My services and processes can all take place online (no physical paperwork)
Whether clients are in Portland, Oregon, or not, I am available to help them with the same care and service as in person. Have a pressing financial item you need to discuss? Place time on my calendar.
Something about Economics / Investing
We've seen some significant declines recently in the stock market. We do not know what the future may hold, and the past does not guarantee future outcomes. And we should not use this kind of data to jump in or jump out of the market; a financial plan should dictate investment decisions. But historical data can better equip our understanding of the current investment world. So, what can we learn from the past? More specifically, what happens after a big down month in the stock market? This article has some fascinating data points. The author, Carlson, looked back to the worst monthly declines in the S&P index. He found that 56% of the time, stocks were higher one year later. 72% of the time, they were higher three years later. And they were up 80% of the time five years later.
Have something on your mind? Schedule a free call with Nate.
Pursuit Planning and Investments, LLC is an Investment Adviser registered with the State of Oregon. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past results do not guarantee future results. Please contact us at 971-803-5948 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions. Additionally, we recommend you compare any account reports from PPI with the account statements from your Custodian. Please notify us if you do not receive statements from your Custodian on at least a quarterly basis. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, www.planyourpursuit.com. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.