A Healthy Man
Here’s one of my favorite quotes:
“A healthy man wants a thousand things, a sick man only wants one.”
I love that perspective, it helps re-center priorities.
It’s pretty common for us to build upon an ever-growing list of wants when things are good (i.e. when markets, the economy, and our financial plans are “healthy”). We know when our desires are getting out of hand — and that’s okay — but it’s on us to make sure our plans stay healthy and don’t end up “sick.”
… And in a year like 2022, the overall climate was bound to make some of us feel a little ill.
In difficult times I like to play a trick on people. Here’s how it goes:
1) I lay out a ton of information about how terrible things are.
2) Then I ask you, “given how terrible things are, how are you doing?”
…And almost every time the answer is “I’m doing pretty great considering the circumstances” or something similar. We get to choose to look at the bright side if we want to and I find that people typically do that.
So, let’s start with this trick:
A Ton of Information About How Terrible Things Are:
Everything struggled last year.
…Well, everything except energy and defense stocks, that is.
(But really, who loaded up on investments in fossil fuels at the onset of the Biden Administration and the military industrial complex at the closure of the Afghanistan war? Not me.).
Here is how the markets fared last year:
The three major US stock indices, The S&P 500, The Dow Jones Industrial Average, and the NASDAQ Composite were down 18.11%, 6.86%, and 32.54%, respectively.
International developed countries (like Canada, Japan, and various European countries) saw their prices decline 14.01% (via MSCI EAFE) and Emerging Markets (like China, Brazil, India, and many other developing nations) fell 19.74%.
But perhaps most shocking was the decline of the bond market as a result of the Fed’s fastest monetary tightening cycle ever. The bond market (via iShares US Aggregate Bond Index) fell 13.03% in its worst year on record.
Here’s the bad news in visual form:
We know that bad things happen in financial markets (after all, no risk = no return) but this was special.
This was the worst year ever for bonds.
This was WORSE than 2008 for a 60% stock, 40% bond investor.
The only year worse than this for a 60/40 investor was 1931…. So, yea, this was terrible.
See for yourself:
So it was all pretty bad, right? Right.
Still, your plans and portfolio should have anticipated that difficult unpredictable things could happen. Things like:
The Tech Bubble
The Enron/Worldcom Scandals
9/11
2008 Financial Crisis
2020 Covid Crash
…and now the 2022 Russian Invasion of Ukraine and the subsequent inflation crisis.
You would have made it through those prior crises if your portfolio was sound, your risks were calculated and reasonable, and you didn’t panic. I can’t see why that wouldn’t be the case for this current environment (that said, a portfolio full of profitless tech stocks and cryptocurrencies may seem like a “sound portfolio” to some — maybe get another opinion if you’re not confident in what you’re doing.)
In early conversations with clients I often try to gauge their investor behavior profile by asking them how they reacted to the 2008 Financial Crisis. Now we have 2020 and 2022 to put on your resume as an investor, and if you make it through this thing then it kind of becomes Your Crash. These times help form who you are as an investor.
“You are what you do” according to Swiss philosopher Carl Gustav Jung.
Okay, let’s move on to the next part…
“Given how terrible things are, how are you doing?”
At the beginning of this email I mentioned that most clients seem to have weathered these difficult markets with positivity and resilience. However, I realize that’s not the case for everyone and I genuinely want to know how you’re doing
If you’re doing great, that’s wonderful. I want to hear about it.
If you’re struggling, maybe I can help.
If you’re on the fence, maybe I can push you into being optimistic and confident.
(Click this to send an email)
If you have your financial health and things are relatively good, remember the Confucius quote. If you don’t have your financial health, let’s see if we can help you get better.
That’s all for now.
Onward,
Adam Harding
www.hardingwealth.com | CFP | Smartvestor Pro
PS…. Clients, please feel free to book your annual review here. You will receive another email reminder soon.
*Past performance not indicative of future results. For educational purposes only.
