2018 was a rare year on a number of fronts. First, the stock market was negative. This happens about 1 out of every 3 years so it’s not that it never happens but it is definitely in the minority of calendar years. Second, (outside of short-term cash reserves) almost every asset class either lost money or was flat. Even in periods like 2008 when the financial world was collapsing, safe assets like government bonds (especially long-term bonds) rallied. 2018 was both unique and unfortunate such that asset classes across the board were in the red. The scoreboard is below:
So, does this lousy year in the markets warrant any change in investment strategy? We don’t think so. While 2018 was a bad year, it pales in comparison to years like 2008 for a diversified portfolio. Investors should accept that they are dealing with risk assets which sometimes can all go down at the same time. If anything, 2018 creates an opportunity to rebalance back into the risk assets that have dropped the most and for those who had been sitting with cash on the sideline to feel better about getting back into the market. Long-term investors recognize that negative returns, however painful, are an important part of the investment process.
Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.