Investing for the Long-Run

How many times do you check your phone a day? A study carried out by Asurion revealed that American adults check their phones an average of once every ten minutes – around 96 times per day. Our phones have replaced so many things- our cameras, our diaries, our alarm clocks… We use our phones to read the news, track our sleep, record our runs, check our investments…the tiny computers in our pockets provide a means to do almost anything at the click of a button. The devices have enabled us to track our performance in all aspects of our lives – we can count and track the steps we take each day, the number of breaths we take whilst sleeping, and every price movement in our portfolio. But how much is too much? Are we checking our performance too often?

As we get through our days, weeks, and months, we realise that some days we perform better than others. Some days we get our 10,000 steps in by noon, other days we barely reach 1,000 steps by dinner. If we take a close look at our lives, we realise that our performance is often impacted by external factors that are out of our control. As a runner who has recently moved to a colder climate, it did not take long for me to realise the impact the colder weather has on my heart rate. I personally like to monitor my heart rate whilst running and try to keep it within a certain range. I am often more concerned with my heart rate range than I am with my speed. In colder climates, it is normal for your heart to pump more blood to keep you warmer, and therefore if I were to keep the same heart rate range, my speed would need to go down. This is equivalent to a lower performance, due to an external factor – the cold. Is the weather cycle affecting my performance in such a way that I need to worry about my long-term running goals? Do I need to change my training plan in response to the weather cycle?

A cycle is a wide term that refers to a trend, a pattern or a series of events that occurs around a period of time, around certain events or at the same intervals. We observe cycles in the weather, in our lives, in nature, and even in the stock market.

If we take a closer look at the stock market, we can observe cycles and trends of varying lengths and impacts. There are trends that repeat themselves every ten years, every year, every season, every few months, every day, and so forth. Analysing and following these trends and cycles can be helpful for some professional traders, and they can provide indication as to when might be better times to buy or sell a particular asset. However, when it comes to long-term investing and building wealth for retirement, these trends are a bit less useful and can sometimes be a little confusing. We see constant cycles of ups and downs in the stock market, and although it is important to be aware that these cycles do occur, it is also important to remember that as a long-term investor you have created a plan with your advisor for the long term. It is often not in your interest to rebalance your portfolio based on short-term market trends if you are in a long-term position or if your portfolio already has an element of management. It is in your best interest, however, to monitor your plan over time with your financial advisor. As time goes by, your risk tolerance, goals, or life circumstances may change, and this will have an impact on your financial plan.

I understand that it can be difficult to ignore market cycles and their short-term impact on your portfolio. Back to my running, it can be very discouraging seeing sub-optimal performance. What keeps me going is knowing that this is just part of the weather cycle, and if I push through, my effort levels will balance out and my results may be even better than they were in the previous warmer season. When it comes to investing, your portfolio performance will not always be what you are expecting. Sometimes it might seem sub-optimal, reflecting a market trend or cycle. Just like our lives, markets will go up and down. Some days external factors will influence our performance for the better, sometimes for the worse. It is important to stay the course, not to over-check your investments and not to make emotional decisions.

Our two cents: Remember that if you are in a long-term investment strategy, and your goals are long term, your patience must also be long term. Over-checking your portfolio may give rise to negative feelings and worries in vain – long term portfolios are not impacted by short term volatility and market cycle trends. So put your phone down and your head up and focus on the end goal.

My body lets me know when something is wrong and if changes in my performance are not due to the weather cycle and need to be addressed. In the same way, as your advisers, we will let you know if a market event requires a change in your long-term financial plan, or your portfolio needs rebalancing.