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Staying on Course with a Plan

The act of navigation can often be a problem for many of us.  It evolves into a solution as navigating takes you from where you are to where you want to be.  But in driving, sailing, mowing the lawn, and investing, navigating can still feel problematic.

Take sailing.  Your destination point is across the bay, or through a channel, and even into the wind.  To arrive, the skipper must read the wind by looking up at the telltales, down at the ripples on the waves, near and out, then near, and then out and on and on.  Anyone who has ever tried to teach a fifteen-year-old how to drive understands the problem of navigating aggressive drivers, potholes, streetlights, signs, winding roads, and the like.  And cutting the grass in the bright sun? To keep the line straight, sometimes you look out, sometimes you look close in, taking whatever signs the ground yields when reflecting light obscures the line.

These navigational dilemmas also exist with investing. Let’s say you have a portfolio, and you put a good deal of thought into its design.  You’ve read, you’ve listened, you’ve processed, and you decided on a strategy.

And then 2020 happened.  According to Morningstar.com, back in February, domestic stocks dropped over 30 percent in 4 weeks, as measured by the S&P 500, a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

Small caps and international stocks fell to near 40 percent as measured by a few of their market indexes.  Even bonds, if there were any stretch for yield, experienced high single-digit downside pressure.

And since?  With great help from the tech sector, the S&P 500 has bounced back almost 60 percent as of today (October 14).  Historically, its average price-earnings ratio, also known as P/E ratio, is slightly below 17.  Its P/E ratio now sits near 23 (JP Morgan Guide to Markets). The tech sector is priced above 27 (JPMorgan GTM).

Worried about stocks and seeking a safe haven? Ten-year US Government bonds yield .72 percent as of the date of this writing, according to wsj.com.  Is that enough return for long-term objectives?

At this point, one may look at the long term and the near term simultaneously.  Yes, stocks should provide the most significant growth opportunity over the next ten years.  Yes, safety pays next to nothing.

Regardless of these outlooks, these sectors could all go down again. Generally speaking, sticking to the long-term plan often provides the best long-term results. But if the near-term volatility is unsettling, consider dialing back the risk factors. Not enough to set you too far off course, should things continue to improve, but enough to feel more confident during any near-term market shenanigans.  In sailing, that is called a tack.  You don’t turn around and head back to the dock, but you don’t have your bow pointed straight at your destination, either.

Metaphors only go so far. If you can, stay put, especially during a steep decline.

If navigating is a daunting task, consider getting that plan in motion now. We are often asked, which came first, Investment or Planning?

Regardless of what came first for you, planning and investing go hand in hand.  A plan is essential to any good trip, so isn’t it time your adventure with investing had a plan? And if you do have a plan, might it be time for a review?  Need help charting your course?  Reach out to a Bridgeworth advisor to help you steer your investments in the right direction.


Any securities, indices, and other financial benchmarks shown are provided for illustrative purposes only and reflect the reinvestment of income, dividends, and other earnings. They do not reflect the deduction of advisory fees. Investment products are subject to investment risk, including possible loss of the principal amount invested. You cannot invest directly in an index.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the broad domestic economy’s performance through changes in the aggregate market value of 500 stocks representing all major industries.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, representing approximately 10% of the total market capitalization of the Russell 3000 Index.

The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the UK.

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization-weighted index designed to measure the equity market performance of the emerging market countries of the Americas, Europe, and the Middle East, Africa, and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa. Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

Barclays 1-3 Year Government Bond – Barclays 1-3 Year Government Bond Index is a market value-weighted performance benchmark of investment-grade government and corporate bonds with maturities of one to three years.

The information and material presented in this commentary are for general information only. They do not specifically address individual investment objectives, financial situations, or the particular needs of any specific person who may receive this commentary. Investing in any security or investment strategies discussed herein may not be suitable for you, and you may want to consult a financial advisor. Nothing in this material constitutes individual investment, legal or tax advice. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance.