Just keep swimming.


(Image copyright Disney, Inc.)

Being an investor over the past two years has been tough.  You did everything right.  Bought great companies, stayed diversified, and yet, the results have been “meh.”  It’s probably one of the most frustrating things, because now you question everything…the principals of investing, diversification, the economy, your advisor, the government, and so on.  The more I think about being an investor, the more I realize it’s not much different from my experience of being an athlete.

I was swimmer for 12 years.  For those of you who have not been involved in the swim world, we can be a strange bunch.  From practices that start at 4:30 AM before school to 4 hour workouts to always smelling like chlorine (even in the short off season) to swim meet sessions that last forever, it’s a different way of life. But you embrace it (most of the time) and show up for practice the next day (not necessarily smiling).

I have always thought that if you didn’t contemplate quitting the sport at one point or another, you either (a.) weren’t passionate enough or (b.) you were one of the lucky ones who never fell into a rut.  And the rut can be a dangerous place to end up.  This is where I think the economy has fallen…a rut.  As an athlete, this can be the most psychologically challenging aspects of the sport to overcome.

Consider this…you work hard at every practice in the pool, eat right, sleep enough, gut it out in the weight room, and on top of that add some additional cross training cardio.  You feel strong, fast and confident.  Then you go to a meet.  You’re excited because training has been going so well and feel ready.  But you dive in and your time is terrible.  I mean, so bad your 9 year old self could have put in a better performance than that.  What gives?  You shake it off and show up at practice the next week determined to work hard and improve only to fall apart at the next meet.  Now repeat this 5-6 times and as an athlete…enough is enough!  It’s obvious to you at this point that your coach has no idea what they are doing, the sport is stupid, and butterfly was created by some idiot masochist that enjoyed watching people thrash around in the water only to ultimately drown.  Welcome to the rut.

The thing about swimmers is that we’re a very stubborn lot.  Hot headed.  Crazy at best.  We don’t give up easily and you know what?  The coach wasn’t really as clueless as we claimed they were and after our temper tantrums were done, we got back to basics.  That’s the cornerstone of being successful as an athlete and, in my opinion, an investor as well.  It could take, weeks, months and heck, in some cases years to make it out of the rut.  But when the hard work finally paid off, you looked back and thought, “I can’t believe I wanted to quit!”

In a society of marketing the idea “one trick to be skinny now” and “how to be a millionaire tomorrow without any risk,” it’s easy to become impatient with the investment process.  As of the close of the market Friday, an investor in the “Moderate Allocation Profile” according to Morningstar would have been down 6.8% (Morningstar.com, February 5, 2016).  On top of that, for calendar year 2015, if you invested in a diversified bond portfolio (to include Treasuries, Foreign, High Yield, Municipals) you would have been negative (JP Morgan Research).  Not a lot of hiding places in a market such as this.

I am not going to abandon the basics because the markets have been frustrating.  Owning quality investments and remaining diversified are more than likely going to continue being successful strategies for the long term.

Here are things that we know:

  1. Growth is slow, but it’s still growth. Last quarter our GDP growth measured +1.8% and is forecasted to be 2.3% at the end of the first quarter of 2016 (Bureau of Economic Analysis).
  2. Unemployment was 4.9% which is much lower than the long term average of 6.2% (Bureau of Labor Statistics).
  3. Price to earnings ratios are at normal to slightly below average measuring 15.1 on the S&P 500 as of February 5, 2016 (JP Morgan Research).
  4. Investor sentiment was more bearish in January of 2016 than it was in March of 2009 according to the AAII Investor Sentiment survey. That alone leads me to believe that the negativity is overdone.
  5. As a percentage of assets, corporations have the largest amount of cash and equivalents on their balance sheets (FactSet).
  6. Oil has dropped from $50.48 last February to $30.83 as of the close on Friday, February 5, 2016. We typically don’t experience commodity weakness if we are heading toward a recession (JP Morgan).

Where we go from here is anyone’s guess, but history has shown that when we have conditions as described above, we aren’t headed for a bear market or even a severe recession.  You can read about how “the markets are going to crash 80% this year unless you buy my book and protect yourself” or you can read about the fascinating entrepreneurs that are going to change the way we live (if you’re reading this from a mobile device or tablet, did you think that was going to be possible 10 years ago?).  And just as in sports, you can focus on the number of times you’ve lost or the successes you have achieved.  Your frame of mind is entirely up to you.

In this case I’ll be like Dory and “just keep swimming.”

Please do not hesitate to call or email with any questions, comments or concerns.


Carolyn Menker

LPL Wealth Advisor

Williamsburg Financial Group


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

Indexes are unmanaged and cannot be invested into directly.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not protect against market risk.

Economic forecasts set forth may not develop as predicted.

All investing involves risk including loss of principal.

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