The Legacy Perspective – October 2022

by Steve Wachs, CFP®

“The nice part about being a pessimist is that you are constantly being either proven right or pleasantly surprised.”

George Will

Matt recently wrote about the topic of optimism and the number of “Optimist Clubs” that exist throughout the United States. One of my top Strength themes is Positivity which ties to an optimistic viewpoint. However, after going through what occurred in the financial markets in September, I am now a card-carrying member of a new club – the “Pessimist Club.” Part of being in the Pessimist Club requires focusing on the worst things that have occurred. Here is a list of those “worsts” that have taken place since I began working in the financial planning/investment world.

  • September 2022 – worst month for stock market performance since March 2020 when the pandemic began.
  • 2022 – worst year for bond returns since 1926.
  • March 2020 – worst economic shutdown as the COVID pandemic began.
  • 2008-2009 – worst financial crisis since the Great Depression.
  • 2000-2009 – worst decade of stock market performance in history.
  • October 19, 1987 – “Black Monday” – worst one-day decline in stocks.

Those are a lot of “worsts” and as a good pessimist, I could go on and on. Actually, I am not a real pessimist and Matt isn’t a real optimist as it relates to financial markets. We are both realists. Here is what reality shows are the lessons to survive the “worsts.”

  1. Protect any needed income distributions from market declines so we don’t have to sell at the wrong time.
  2. Systematically invest cash during times of maximum market pessimism. Inflation has not affected everything as we are investing in quality companies that have decreased in value by over 25% since the beginning the year.
  3. Make sure you have a financial plan in place and know how a temporary decline in investment values impact your specific goals.
  4. Do not sell investment assets just to feel better. Feeling better in the short-term can lead to long-term disappointment. You cannot let fear dictate action.

Some of you have asked what we are doing with our own investment portfolios during this downturn. We are truly “eating our own cooking.” We own many of the same mutual funds, ETF’s and stocks you own. We have reallocated our different accounts with the same methodology. We have continued to put excess cash to work. Yes, we have also witnessed the value of our accounts decline this year. We also firmly believe as realists that by learning from the lessons of the “worsts,” portfolio values will reach new highs in the future.

Disclosures

  • Legacy Consulting Group is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
  • Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed.
  • All investments and strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that an investor’s portfolio will match or exceed any particular benchmark.
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