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A Transformed Investor's View of Market Uncertainty

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During times when stock prices swing up or down by wide margins, it can be difficult to maintain a strong sense of investment discipline.

Part of the challenge is to understand from an intellectual point-of-view the importance of "staying the course" and sticking with a long-term investment plan.

The other side of the equation is following through and not letting market "noise" interfere with an already well-conceived and comprehensive financial plan. (Note: A holistic financial plan, which considers portfolio-related issues as part of an investor's broader personal financial situation, is offered on a complimentary basis to each IFA client.)  

As we've written many times in the past, research by leading academics gives IFA's investment committee confidence that a globally diversified portfolio of passively managed stocks and bonds provides investors with their best opportunities to achieve the highest returns over time, net of fees. 

The following was originally written during a particularly turbulent period for stock investors in 2018. But its underlying themes and observations still strike us as relevant to today's passive investor.

As a result, we submit this article with a prologue by David Booth, Dimensional's executive chairman and founder. It focuses on observations about investing by Dave Goetsch, who served as an executive producer of the television series "The Big Bang Theory," which ran on CBS for 12 years through May 2019. Here it is:  

Markets have been up and down this year, which can be hard for many investors to live with. During periods like these, hearing stories about how other people deal with uncertainty can be helpful.

My friend Dave Goetsch has served as an executive producer of the television show "The Big Bang Theory," (which ran on CBS from 2007-2019). Even though he and the other writers on the show make common sense out of complicated science for a living, Dave used to respond to market fluctuations with panic rather than logic. But his point of view changed fundamentally when he learned about Dimensional's perspective on investing and discovered a new path for his financial life.

Check out Dave's story—I think you'll find it to be a source of calm. It also showcases the benefits of working with a financial advisor and having a philosophy you can stick with.

— David Booth


Now and Then by Dave Goetsch

Now and Then

By Dave Goetsch

Dave Goetsch, Executive Producer of  The Big Bang Theory, reflects on his investment experience in the recent market downturn and contrasts his new perspective with memories of the 2008-2009 financial crisis.

Seeing all the recent headlines about the sudden downturn in the stock market has transported me back to February of 2009, when I was close to despair. It's striking how different I feel now.

In February 2009, the stock market was down around 50% from its high, and everyone seemed to feel like the sky was falling. I was familiar with this state of panic because my relationship to the financial markets was that I didn't trust them.

They were always going up and down in ways no one could predict, and I couldn't trust those folks who said that they could anticipate what was going to happen. So when the market went down, I went down with it—sinking into a depression, knowing there was nothing I could do.

What a difference nine years make. I haven't changed because the stock market rebounded. I changed because I learned that there was a different way to think about investing. I was right not to trust those people who thought they could predict what was going to happen in the markets, but I was wrong in thinking that there was nothing to do. I've learned that I can have a great investment experience if I just accept a few simple truths.

I have to understand the uncertainty of the market. The stock market, as measured by the S&P 500 Index, has returned about 10% per year over the last 90 years,1 but there are very few individual years in which it has ever actually returned that amount. In fact, how many of those 90 years do you think the S&P 500 was up more than 20% or down more than 20% for that year? The answer is 40. Astounding, right? I wish somebody had explained that to me decades ago. Then I would have known to look at stock market returns in terms of decades—not years, months, days, or hours. I would understand that so many of those articles and cable news pieces are just noise, designed to keep an audience obsessed and unsettled.

I haven't changed because the stock market rebounded. I changed because I learned that there was a different way to think about investing.

In order to be a long-term investor, you have to have a long time horizon. This can be hard to remember when you're being assaulted by noise, but if you can stay strong, the results are stunning. By results, I don't mean the investment returns, which hopefully are good. The return I'm talking about is how I feel every day. I worry less—not just about the future, but also about the present. Of course, I know that there are no guarantees when it comes to investing, but I feel like I'm going to be okay. I have a plan.

There's no way I could've done this without a financial advisor. I needed someone who could not just talk me through what my asset allocation should be, but also help me work through how I felt about investing and what exactly I could do to change my perspective.

I was a mess nine years ago. Now, my outlook is totally different. The markets haven't changed; they still go up and down. The difference is, I don't anymore.


1. S&P data © 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
Investing risks include loss of principal and fluctuating value. There is no guarantee an investing strategy will be successful.
Dimensional Fund Advisors LP pays Dave Goetsch for consulting services. Dimensional Fund Advisors LP does not endorse, recommend, or guarantee the services of any advisor. The experience of the author may not be representative of the experiences of other individuals. All expressions of opinion are those of the author and are subject to change. This content is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

 

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