A Short Story
I want to share a short story with you. Every bit of this story is true, except for the client name.
It’s a story about the value of real financial advice. I don’t write much about the value of advice, which is probably a mistake because I know from all my dealings with humans and money that the vast majority of us would get better real life financial outcomes and reduce a huge number of personal pain points if we had a trusted advisor and guide by our side.
Let me introduce Jane.
Jane is a wonderful and successful professional. Jane started feeling anxious about the recent market decline in March, and after I emailed her to check-in, we set a time to chat. It happened to be March 23rd. This was the day the US stock market (S&P 500) bottomed after falling 34%. Most other markets, including small companies, international stocks and emerging markets, had fallen more.
In our conversation I explained and reminded, as I always do, that we expected this. I didn’t know what would cause it, I certainly didn’t expect Coronavirus, but I did know that the market would fall somewhere north of 25% roughly every 4 years. I told her that her portfolio was behaving exactly how I expected, and that the best thing she could do was not look at it.
The market goes down but it never stays down. Although it feels as though the world is ending, it’s not actually going to end.
I know that. Trust me.
Don’t look.
I will let you know when it’s safe to look again.
We then talked a bit about her cash balances and we decided that she had a large sum over and above what she needed, even in the most conservative of assumptions. I reminded her that when the market falls the risk of investing has decreased, not increased. Our brains are telling us all the wrong things.
Ignore your brain.
She took a deep breath and wired the money to her investment account.
A beautiful sunset on the last night of our staycation.
A few weeks ago we met in my office.
I printed off a statement and happily told her that she could look at it. It’s safe to look, I told her. This was the first time she had looked at the balance since the market started falling in February.
It was a very pleasant surprise for her.
Once she got over the surprise of her account being up, she asked “ok Georgie, how bad did it actually get? Tell me.”
I gave her the account balance on March 23rd, two days before she made her most recent investment.
Her face dropped. She said ‘I would never have invested that money if I had known how bad it was’
By having a true trusted advisor by her side, she was able to not look at her account balance, save herself an enormous amount of stress, think unemotionally and therefore take advantage of a buying opportunity that we might not see again for years to come (or ever).
The value of this over the long-run is hard to quantify. Actually, it’s impossible to quantify.
Had she done the opposite – looked at her account balance on March 23rd, panicked and sold, her future would look very different.
And let me tell you, in that moment, on March 23rd, everyone and everything was screaming ‘sell now before it’s too late and you lose everything.’ That was a pivotal moment. (Since that pivotal moment the S&P 500 is up over 55%).
The decisions you make in those pivotal moments will impact your life forever.
This time the pivotal moment was a market moment. But it could have been a moment in her life. A death, a divorce, retirement, a birth.
It’s about having someone who can bring insight from outside your life to help you avoid emotionally driven decisions at key moments. You can’t put a number on that.
Georgie
georgie@libertywealth.ky