RGA Letter to Clients and All InvestorsSubmitted by Robert Gordon & Associates, Inc on March 16th, 2020
We sent this letter out to our clients last Thursday, March 12th. As the situation progresses, the temporary losses in the market continue and there are more people getting infected by the virus every day. In the latest attempt to curtail the spread, the President is advising against groups of 10 or more people. Limiting the spread is what will get us through this pandemic and the market will return. While the below letter is days old, it is still relevant. Keeping calm and sticking with your long term financial plan is THE ONLY proper reaction.
Think back to March 9th, 2009. I’m not sure what the weather was like, but the market was in panic mode. “Bloodbath” “Turmoil” “Panic” “Free Fall” “Crisis” All the same words that are being used today were used to describe a time which would have been the best time to invest in the last 15 years. That day was the bottom of the market during the great recession and since that day, the market has gained over 260%. That opportunity would have been very hard to see in the moment.
Now, we are dealing with a virus for which we have no cure and people are dying. The sanitation aisle shelves are empty and public events are getting canceled.
What do we do from here? Is the sky really falling, or will we look back at this time as another challenge that we got through? Our view is that this is an issue that needs to be taken very seriously, but it has been blown way out of proportion. We will get through this because we always do, no matter how scary or challenging. Yes, we need to use common sense and be more conscious of our health, but this will not be the biggest concern of the century.
As for our investments, like we tell you in our meetings, we eat our own cooking. We invest in the same investments as our clients under the same principals. We are experiencing the same market volatility that you are, and even with our training and experience, it is natural to feel like you need to do something. History shows us over and over again that the worst thing you can do with your long-term investments is throw your investment plan in the trash and move to cash. It feels like the right thing to do in the moment, but retrospect will show you that it will be the wrong long-term play. If you disagree, look for any market moving event that lasted forever. The market is self-cleansing. Unstable companies may be weeded out, but the market as a whole will bounce back stronger than it was before. It always does as capitalism requires that it does.
Warren Buffett said it best, “Be fearful when others are greedy. Be greedy when others are fearful.” Right now, people are fearful. This supports our recommendation to take advantage of the temporary discount of the market.
We aren’t sitting on our sanitized hands and just waiting though. We are looking for opportunities to harvest any losses in your taxable accounts for a taxable advantage and rebalance your accounts back to the strategic allocation to take advantage of when the market bounces back.
If you have concerns, we want to talk to you. We have only received a few calls from concerned clients, but we want you to know that we are happy to talk whenever any concerns arise.
Keep Calm & Invest On
Bob, Rik, Nic, Morgan, Kim, Chris, Lanae