My son is 4, and he loves to draw. He’s a champion of the stick figure genre- some of his best works are disproportionate portrayals of the family that now proudly hang on the fridge. (c’mon, bud, Dad isn’t that short 😉). While he’s often found with a pen in hand, he hasn’t yet conquered the art of writing letters. So, the other day, when he wanted to write a note for his dear old dad to take to the office, he needed to enlist some help from his big sister. As a 6-year- old, he has mastered this subject…
Happy to help, my daughter utilized an efficient, old technique to help my son draft up the note rather quickly and without thought -Connect-the-Dots. In my son’s eyes, what started out to him as a seemingly incomprehensible littering of dots on a blank page is now a wonderful gift that sits proudly above my desk. Not bad for a little guy, huh?😊
What’s amazing about Connect-the-Dots artwork is its inherent simplicity. It provides a framework to help us get to the desired end-state. All we must do is focus on what we can control -follow the numbered dots, keep the pen on the paper, don’t skip ahead, and finish to the end. Do that, and we’ll have a wonderful picture to look back on.
While it seems simple, it may not always feel that way. There is an element of trust we must assume because we can’t always see the picture the dots are leading us towards. Life can be full of moments where we feel like we are standing on a dot without a clear path. These moments can leave us feeling confused, hopeless, or wanting to quit (maybe all the above). It’s only when we get to the other side that we can look back and see the full picture. Sometimes we realize that we can look back and see the full picture. Sometimes we realize those bleak moments may have actually been leading us to a pretty great place in the end. The sentiment is no truer for our personal lives than it is for our investment strategy.
Famed Apple CEO, Steve Jobs, may have said it best: “You can’t connect them looking forward; you can only connect them looking backward. So, you have to trust that the dots somehow connect in your future. You have to trust something- your gut- destiny, life, karma, whatever.”
At EverOak, our trust is in sound Financial Planning. a financial plan provides the framework for long-term investment strategy, and it guides us much like the dots on our trust in depressing clickbait news headlines or in doomsday ads trying to convince us to derail long-term investment strategy. Nor will it be tempting to trust our friendly neighbor’s wonderful advice to sell now or to seek out better short-term investment returns.
We get it. This is easier said than done. As I said before, these moments can feel hopeless without proper perspective. So, let’s look at the data for some points in history where we felt the exact same way- how did the dots connect in these instances?
Since 1928 there have been 56 market corrections in the S&P 500 (10% declines or more)- Including the present year-to-date returns in 2022. That equals a correction roughly every two years, and During these times, we may have felt the same way we do today- a gloomy outlook coupled with even more gloomier headlines. It’s only when we look back that we find these corrections connected into a pretty great picture. If we connected the dots between 1928-2022, through all 56 market corrections, we find S&P 500 averaged an annualized 9.8% per year!
Not convinced? Let’s look at some more recent bear market events (-20% decline or more): the Great Recession in 2008 and the Covid 19 Pandemic downturn in 2020- how did the dots connect? the dots connect?
If you had the fortune of investing at the park in these instances (October 9, 2007, and February 19, 2020), you would have experienced two of the most aggressive downturns in history. During those periods, it was extremely hard to visualize anything leading to a pretty picture.
In contrast, check out the data if we were to have ignored the noise and done nothing! Not only would we have been well rewarded. The date below shows the same investment and returns through April 30, 2022.
When we can’t see the path ahead, we must remember a few things:
- A well-thought financial plan provides a framework and strategy to provide perspective and hope for these scary short-term moments.
- Losing trust and making impulsive decisions that deviate from our plan might feel right, but in the moment can ultimately derail our long-term investment strategy.
- With a plan in place, we can trust that the dots will connect even though we know for certain that there will be zig-zags along the way.
So, let’s move forward with trust rather than fear and keep it simple. Focus on what we can control- follow the dots, keep our pens on the paper, don’t skip ahead, and finish till the end. If we do so, we’ll find a pretty amazing picture to look back on.
Jeff is a CERTIFIED FINANCIAL PLANNER™ professional at EverOak Wealth Co. Jeff and his team recognize that running this race for the long term is one of the greatest challenges you’ll face in your lifetime. Thus, they combine critical planning and investment strategies with real-life perspectives. Their consultation is provided at no additional cost to Alliance 403(b) Retirement Plan participants.
