The market in February was not good. It was not as bad as you would expect based on the news. Most of you essentially went sidewise.
The news has been dominated recently with the situation between Russia and Ukraine. Some of you are likely worried given the recent market fluctuations if the news is going to hurt your long-term financial health. We assert that your accounts in the long run will probably be fine. As we have mentioned in the past, companies are very adaptive. Whatever negative effects are present currently due to the war will fade away in time due to companies figuring out ways to adapt to it. In the long run, stock growth is driven by company profits and only the profits. As long as a situation doesn’t permanently hurt a company’s profitability, then the company will be fine. The humanitarian disaster we are seeing is mostly not relevant to business profits in the United States and to a lesser extent in most of the Western world. As far the stock market is concerned, in the long run, the humanitarian disaster does not matter.
Sure, because of inflation or oil prices, some companies will be losers (airlines for example). Other companies will be winners. Index mutual funds capture broad collections of all companies.
Our economy has in the past survived many disasters such as various wars, terrorist attacks, etc. While the stock market had crashed in the short term, eventually the market soared to higher heights. We don’t see any reason to suspect this current situation will be any different than the many other historical examples. Things will be in turmoil in the short run, but it will eventually pass. Stick to your investment goals and objectives. Don’t let fear overcome your reason and make you do something rash. Remember that if the market goes down in the short run, you have a greater likelihood of making money in the long run. If you are able to stick it out, you will very likely make all that money back and more. In fact, because the market will most likely recover, the market as it is now is selling at a discount. If you buy into the crash, you will likely make more money. It is very scary to do that but historically many fortunes have been made doing exactly that.
There unfortunately will always be disasters in the world. When they happen, it is important to keep your financial composure. You might have non-financial concerns about the news such as ethical, political, etc. but financially the news is not something you need to fear. In the end this news item and its effects will pass.
If you have any questions about your investments (or your tax), please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.
Thank-You,
Daniel and Eli
As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.
If anything that we mentioned above interests you, please consider downloading our free e-book. The book contains our thoughts on investment management and some information that we think everyone should know. You can also download it below.
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