Ted Seides Tweeted "If you’re investing with a 100-year time horizon, nothing that happens today matters. Market goes up. Market goes down 20%. There’s a crash. It doesn’t matter." It's a funny coincidence since this has come up a couple of times here over the last few weeks.
Focusing on the correct time horizon is a crucial component of investment success. For someone who is 48 today, looking to retire at 65 and who will be relying on their savings to do so; yeah this 20 whatever percent decline doesn't matter. Realistically, over the next 17 years there will be be a couple of more declines like the current one. The solution for this reality is having the correct asset allocation and accounting for sequence of return risk with some sort of position in cash or cash proxies (things that can't go down in price).
To talk about 100 year time horizons is to talk about dynastic or generational wealth and I don't think there are too many people with enough money to think in those terms. Some of course do but it is very unlikely that anyone reading this cares beyond leaving something to their kids or grand kids if there's anything left over.
This led me to a fancy term for an idea we've talked about before, risk dependent paths which "arise when pursuing the wrong path would involve wasting large sums of money or time or both." The context for this idea has always been putting in the time to figure out life priorities so you have an appropriate savings rate in line with those priorities so that you don't waste time and money stressing for an outcome you don't actually want.
While I think 100 year time horizons are a waste of time, it is important for most investors to think in terms quite a bit longer than the current bear market we're all grinding through. Today was "bad" day for stocks, taking the S&P 500 to levels not seen since... September 7th.
The sort of volatility that we've seen lately, kind of grinding around with some big moves with no real progress being made is normal. Some sort of real puke down from here would also be normal. I have no idea what will happen of course but I would brace for the possibility that this is not over and that the end might involve hitting levels that are quite a bit lower than what happened in June.
If you're trying to manage or offset volatility with whatever tools you think make sense, then hopefully they are doing what you hoped they'd do. If you're approach is to stay 100% exposed to equities no matter what (100% relative to your target weighting) then this time is rough but you've got to stick with that. The only reason any strategy works is because you stick with it through the tougher times like now.
When big declines happen, it is normal to learn about the drawbacks of whatever you've chosen to do but now is not the time to make changes. If your approach isn't working as you'd hoped, ok, you're learning but the time to make a change is not the low point for that approach.
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