Turn Uncertainty into Opportunity: The Power of Disciplined Investing

Mike Hanson

We have a saying at Fisher Investments, don't just do something stand there. And that may not seem like the right thing to do right now. And the fact of it seeming that way probably makes it indubitably the right thing to do. When you have a correction and you allow your emotions to get the better of you, as people are showing signs of panic, which they certainly are today, the question for you as an investor who has long term. Who has a longer term time horizon, I'm sure it's at least more than 3 to 6 months from now, if not more than years and years to come. Selling out at a relative bottom, especially as others are panicking along with it, simply doesn't pay. And what you see here is just an example on it. You may sell today. Feel better about it. Perhaps for a little while you feel better. But the question is when do you get back in? Because in corrections they do turn around as quickly as they fall. Taking people by surprise in the same way that it came down. You don't know when to get back in, and the market has a tendency to shoot right back up on you in ways that you can't imagine. Once it does, it may never come back down to that level and the opportunity cost of that is absolutely enormous. And I say this again, if you have longer term plans as an investor, if you have a roadmap on how to get you to your financial goals, you do that via the stock market and you do that by predominantly being in. Being out is no way to ultimately get the long term gains of the stock market.

Though these periods be painful, it's still very important. Now there's another thing I want to say here tied to the don't just do something, stand there. Our work is constant. We are never letting up. We work hard every single day when we come into the office. It's not just about what we have in the portfolio and monitoring that, but every day we come in and ask how have our views that we had before current changed given the current circumstances, preparing for the future and putting in as much work as is necessary, and in fact even more than that behind the scenes to make sure that what we're doing is appropriate for you. And this work, of course, is representative of that. Our sterling visualization team, our incredible research staff, helped me put together this presentation within the last 24 hours as all of this has been happening and to my point about corrections, in fact, around the worst times is when some of the best days happen. Why? Because volatility goes in both directions and in corrections things fall, but rebound as fast as they fall. Again, feeling unfathomable today. Feeling impossible on a day like today. And yet that's the truth. To panic today, to alter your long term plan today simply doesn't make sense. You're very likely not only to miss out, perhaps on some additional downside. That's always possible, of course, but also on very strong rebounds because as things pick up, the rebounds initially tend to be where the most force is, where things pop up the most. To miss that simply very much alters, if not ruins, your chances of getting to where you said you wanted to be over the long haul. And indeed, every single year has its bouts of turbulence.

Corrections are not uncommon. And again, you have to think through your memory and what fades and what stays. And in fact, every single year features negativity. What I have on the screen is showing annual returns, but the purple bars are demonstrating the negative parts of the year. And that, as you'll notice, regardless of how good or bad the year was, every single year has big bouts of positivity and bouts of negativity. There's no really exceptions to that. The fact of it happening here in the front part of the year, ironically, in fact, suggests that in the second half of this year there is a spring like effect really starting to build more positivity than people can probably fathom. I said it before, here's just some numbers to it. Equity volatility is quite normal. Corrections are quite normal. Here we have bull markets going back through time. You can see how long they were there, annualized returns, the cumulative returns, and then you can see the number of 2 to 10% pullbacks which are numerous. I mean look at how often those happen. And then the number of corrections where you get to 10 to 20% even those. Every bull market features them really except for maybe a very short one from '20 to '22. Beyond that, these are things that you should expect to happen, not be exceptional. You should expect investors every so often about every 18 months to two years to two and a half years, finding something to get pretty panicky about. Today's environment is no different. There is some real there. But the panic part of it is no different than any reaction we see. And it's common. Not uncommon.