100 Years & A Broken Record

By The Advocates

Being the caretaker of tiny humans has provided me with information I never wanted to have. I’m glad my kids enjoy Pokémon and I’m glad they’re excited to tell me about them.

But I’d rather discuss my car’s extended warranty with a telemarketer than listen to any more about Pokémon or Pokémon-adjacent subjects. Kudos to all parents who have made it through this phase and prayers to all those in the midst of it now.

I could easily turn them away, but that would squash their delight and probably make them less likely to approach me with other matters and interests. That’s a price I’m not willing to pay.

An investor reading this may feel a kinship with parents enduring their child’s TED talk re: Minecraft strategies, because we’re talking about discipline, again.

There’s some evidence that people need to hear a message 7-14 times to retain it;  its called the effective frequency. This concept has a 100% failure rate for Pokémon data in my brain. There is no number of repetitions that will make it stick.

We’re banking on it being true, however, when it comes to important subjects like your money and the biggest factor in your long-term success as an investor. So we’ve been on repeat about discipline for a while.

Over the last month, we showed you how discipline rewarded value tilt investments despite growth’s recent dominance.

We talked about how markets don’t remember and start fresh everyday, completely at odds with the way people behave. How do you fight this? Come up with a plan and stick to it. That’s discipline.

We looked to the past and found reasons to believe that patience and persistence will provide the best outcomes. That too, is discipline.

Today, via this excellent interactive graphic from Dimensional Fund Advisors, we look at the market’s returns through every recession and downturn over the last century. It’s cool. Look at it, play with it, and absorb the lesson it offers:

“What does a century of economic cycles teach investors about investing? Our interactive exhibit examines how stocks have behaved during US economic downturns. Markets around the world have often rewarded investors even when economic activity has slowed. This is an important lesson on the forward-looking nature of markets, highlighting how current market prices reflect market participants’ collective expectations for the future.

Historically, downturns have been followed by recoveries, giving the markets a very positive trendline. We know this. But it takes discipline to stay in the market when scary things are happening. A good advisor should be able to help you stay put when you want to run.

As you look through the events of the past, try to remember how you held up during these pain points in economic history. How’d you do? Did you stay put and get the recovery? Or did you follow others into panic and jump ship? What would you do differently today?

Asking yourself these questions will help you discover your individual level of discipline and your tolerance for market turbulence, both of which should be considered as you live your financial plan.

If you don’t have a financial plan, you should. Give us a call or click here to schedule a free, no obligation appointment today.

Side note: those who want to improve their memory and retention may find the 5 memory-boosting tactics in this TIME magazine article helpful.