If You Didn’t Sell, You Didn’t Lose...Maybe, Maybe Not

This blog was inspired by a comment somebody from a large news publication made on social media the other day.  It went something like this….

A real financial advisor is focused on YOUR progress towards YOUR goals, not investment performance.  There’s a massive difference.

 I guess the question I would ask is, “If a client’s goals of retirement, paying for healthcare, leaving a legacy, etc. are based on a nest egg they accumulate over time, then isn’t it an advisor’s job – no, wait – isn’t it an advisor’s responsibility to focus on investment performance?!

Wall Street has done a magnificent job over the years of marketing the idea that “one cannot time the market, so it’s best to answer this 10 question questionnaire, figure out the “type” of investor you are, dump you into a diversified investment model, set it and forget it, collect a fee on it and go find the next client.  The theory is, if they put your money into a bunch of different “buckets”, some stuff will do well, some stuff won’t but it will be a balanced, diversified portfolio.  This is all fine and good until a bear market comes along and destroys 30-40-50% of client’s hard earned money.

This same individual went on to say something to this effect…..

<Referring to the financial crisis in ’08-‘09>….If they didn’t sell they didn’t lose (money).  

 Absolutely correct.  Through the miracle of hindsight, we can now look back and say without a shadow of a doubt, that if an investor held on, they probably didn’t lose money.  My question is:  What else may they have lost back then (you know, before the big recovery we couldn’t necessarily foresee at the time)?  Perhaps some sleep, some peace of mind, thoughts of having to reenter the workforce, cut a vacation or two out, downsize one’s home, relationship stress? Now that we are 10 years removed from the last crisis, I think there is a tendency to forget just how devastating it was.  We, as humans, have relatively short memories when it comes to things like this or, perhaps, we prefer not to remember what happened.  Let’s be careful out there!

“Those who cannot remember the past are condemned to repeat it” – George Santayana