Bitcoin is a “crypto” (or virtual/digital) currency. Like other currencies (i.e., the U.S. Dollar, the Japanese Yen, the Euro, etc.), Bitcoin is a means of exchanging goods and services between sellers and buyers. However, it is very different than the Dollar or Yen in that it operates purely in a digital format, and there is no sovereign nation, or central bank, backing it.
Hindsight is 20/20. Or in the case of the stock market, hindsight makes you the smartest investor in the room. It will soon be the 10-year anniversary of when, in early October 2007, the S&P 500 Index hit what was its highest point before losing more than half its value over the next year and a half during the global financial crisis.
Remember that the stock market is ultimately a reflection of what is happening in the economy. If the economy is growing, stocks will rise in value, and, yes, will hit one all-time high after another. In fact, since September of 1954 (the month and year Bo was born) there have been well over 1,000 all-time highs in the market. That is what makes investing a worthwhile endeavor.
When considering your investments, debts, insurance, social security, inflation, and other elements, those factors can generate a myriad of solutions, making it hard knowing which scenario is best. Putting your goals first leads to a deeper analysis by prioritizing your preferences, which then allows us to organize the solutions.
It’s just one day, but…
I’ve told this to my children over the years when they get a little rambunctious. It may also be a good response now for investors whom may be getting a little “rambunctious” with their stock investing. To make this point, we will take a quick look at a classic illustration and provide some brief facts. First, the illustration – which needs no explanation:
Ever ridden in a car with worn-out shock absorbers? Every bump is jarring, every corner stomach-churning, and every red light an excuse to assume the brace position. Owning an improperly diversified portfolio can trigger similar reactions.
In a motor vehicle, the suspension system keeps the tires in contact with the road and provides a smooth ride for passengers by offsetting the forces of gravity, propulsion, and inertia.
A common question we receive (every four years), and a common concern that many have (and often erroneously use to make investment decisions), relates to how presidential elections may affect the financial markets. To answer that question in some detail, attached please find an analysis from Dimensional Fund Advisors.
Certainly, there can be short-term reactions to election outcomes, and it is tempting to think that “this time is different”. But what matters most are the underlying fundamentals of the economy and the financial markets – both of which we pay close attention to.
Continuing with the theme of our last blog, another comment we have recently heard from prospective clients goes something like this –”I’d hate to get started, only to have stocks take a serious fall right at the outset (which, by the way, completely ignores the fact that a diversified portfolio is not fully exposed to stocks). Maybe I should wait for the stock market to fall and then begin. What do you think?”
Well, while no one knows exactly what may lie ahead, a review of the evidence (again) sheds a bit of light on this subject.
There are a few recurring concerns that we here at BCM are hearing from prospective clients about the future outlook for the financial markets. While most who hear our approach to investment management become quite enthusiastic, these recurring concerns still cause consternation, so much so that it sometimes leads to analysis paralysis.
The first concern is the level of stock prices. “Prices seem too high” is what we hear. That’s an understandable concern at first glance. We all want to get a good deal when buying.