I like to keep in-mind the beginning of Rudyard Kipling’s famous poem ‘If’ as I lead investors through weeks like last week: “If you can keep your head when all about you are losing theirs and blaming it on you, if you can trust yourself when all men doubt you, but make allowance for their doubting too…” While certainly no one was blaming last week’s slamming of the global markets on me, emotions ran high in the investment community as the S&P 500 experienced a four-day losing streak to start the month (for the first time since October 2008). I’ve been watching the markets for over ten years now, and large sell-offs can be a result of emotion and not necessarily economic factors. Possessing the discipline to “keep your head when all about you are losing theirs,” is the daily practice of a qualified investment advisor. I don’t live day to day based on emotion or the whims of the investment community at large. I’ve studied the markets, I know the likely cause/effect of various factors as seen throughout history, and I believe in the strategy I’ve researched and implement daily.
Whether you have ten thousand or ten million in the market, it is easy to get nervous on poor investment news (especially if you are reading it every day). However, my clients portfolios are all holding-up based on the investment strategy that I have in place. Regardless of overall market performance, there are typically still opportunities to capitalize on growth in one sector or another. This past week was a great example of how important it is to have a diversified and disciplined investment approach. For example, each day last week that silver dropped (it fell over 25% for the week), I’m sure there were plenty of people ready to jump ship. However, when you look at the long-term picture, I still see silver reaching close to $50 this year since the fundamentals (i.e., supply/demand, US deficit, inflation, etc.) that have been driving the price up have yet to change. In addition, silver is still approx. 14% above its 200-day EMA.
Currently, all the holdings I have in my clients’ portfolios are above their 200-day EMAs. If the markets continue to drop, and last week wasn’t just a healthy correction, I will implement my strategy of selling when each investment falls below its 200-day EMA. This time-tested, disciplined approach helps take the emotion (and fear) out of investment decisions.
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John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit https://www.chladekwealth.com.