“To do nothing at all is the most difficult thing in the world, the most difficult and the most intellectual.” – Oscar Wilde
Today was another difficult day for equity markets as we continue to see fallout from the Coronavirus. As difficult as it is to watch our portfolios lose value, if we are long-term investors this is part of the investing process. We are not market-timers or traders, we are allocating assets and diversifying and we invest through the good times and the bad. What seems like doing nothing, is actually doing something. Re-balancing portfolios to return to target weights, reinvesting dividends and holding the line and not panicking. While it feels much worse, the S&P 500 is now down 23.05% for the year and down over 11% for the past 12 months. Other indexes and specific stocks are down much more, year-to-date Disney is down 36.25%, Boeing is down 52.19%, Carnival is down 70.21% and Occidental Petroleum is down 70.27%. A diversified portfolio is down less than all of them.
Asset allocation and diversification over long holding periods will, while difficult to implement in times like these, continue to offer us the best opportunity of achieving portfolio growth.
Like other panicked markets in the past, this too shall bottom, and when it does it usually whipsaws higher. Missing that recovery would dramatically impact future portfolio values. As difficult as it is, we must seemingly do nothing at this point, while in reality we are doing exactly what we should be doing.
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