BW-2020logo.png
  • Brett Bujdos

Remain calm and stay the course

Will the pandemic and geopolitical events ever end? If they do, it sure feels like it won’t be until 2030.

We are now approaching the two-year anniversary of the initial COVID-19 lockdowns in the U.S. and are beginning to see mask mandates being lifted around the country, hopefully signaling the pandemic may evolve into an endemic soon enough. Great! The “new normal” life will begin then, right?... Not so fast. Wednesday, February 24th marks the date of Russia’s initial declaration of war and invasion into Ukraine. NATO members are now beginning to implement various economic-based sanctions against Russia as a deterrent against further invasion. In addition, forces have been deployed to surrounding NATO countries to deter President of Russia, Vladimir Putin, from advancing past Ukraine in a potential effort to regain territory once held by the Soviet Union (Russia).

Will the various sanctions and military aid be enough to lift the Ukrainian military past the Russian army? It may be too soon to tell. However, one thing is for sure... The Russian invasion into Ukraine has not helped the stock market (unless your portfolio has been heavily weighted in energy and health care the past few weeks). With the seemingly endless market volatility due to impending Fed rate hikes, and now the Russian invasion of Ukraine, how should investors approach their investment portfolios in order to maximize long-term growth of assets?

The answer, as alluded to in the title of this article, is to stay the course. Financial advisor and CEO of Ritholtz Wealth Management, Josh Brown believes, “making big changes to your investment strategy now, after so much fear has already become manifest in the current market, is not a great idea” (Brown). Alternatively, historical returns of the stock market suggest that the “boring” dollar-cost averaging (DCA) strategy provides the best returns in times in volatility. How is this the case? As you may have read or heard throughout your investing education, time in the market trumps timing the market.

The random walk hypothesis suggests stock market prices cannot be predicted, especially over a long period of time. With that said, trying to buy at every bottom and sell at every high is virtually impossible. Metaphorically speaking, picking every horse to finish the race (investing in the market) has suited investors better than betting on the one horse (or stock) to win the race. Josh Brown says later in his article, The worst thing you could do right now, “paradoxically, you want to do less in this environment, not more, to see yourself through to the other side” (Brown). The answer to investing in this market is simple... Invest plainly today to live lavishly in the future.

Reference:

Brown, J. (2022, February 2). The worst thing you could do right now [web log]. Retrieved February 25, 2022, from https://thereformedbroker.com/2022/02/22/the-worst-thing-you-could-do-right-now/.

9 views