VOLUME 17 | ISSUE 3
If a modern-era Rip Van Winkle had fallen asleep on New Year's Eve 2024 and woken up just in time to check his portfolio on June 30th, you couldn’t blame him for thinking that 2025 was off to a boring start. Up more than 6% YTD sounds like a pretty steady-eddy and uninteresting time for the S&P 500 and, more broadly, America.
The devil is in the details though, and to recap for old Rip, so far, your portfolios have endured: headline-rocking faux AI news out of China, tariff tantrums on trade-war rollercoasters, action (to put it mildly?) in the Middle East, and almost daily headlines about how AI and technology in general are going to change everything about everything for everyone. When these and other factors can cause the most-followed US stock market index to crater over 18% in only 40 days, what’s an investor to do?
Well, at the risk of over-simplifying, don’t do too much. Our clients hear me say “stay the course” or “stay invested” or something to that effect in almost every meeting. But what does this mean for professional managers – what fundamentals are governing things behind the scenes that give Armor and our clients confidence in the long run?
We know that price fluctuation is a normal part of investing, but we also know we can’t consistently predict the “when” or “how much” parts of the equation.
Acknowledging this fog that comes with market participation helps us tune out the noise and focus on principles that allow for long-term success.
Some of these principles include:
*A focus on the ‘why’, or the long-term goal, of each account.
*Staying on top of cash needs. If you are making withdrawals, your portfolio has a few months’ worth of cash (at least) in a less volatile slice of the pie chart (see Graham’s article Durable by Design from April’s Aegis) to help you weather any market storms.
*Equities are your friend. As John mentioned in his Aegis article at the beginning of the year, they are a safe long-term investment, but asset allocation decisions need to be made within the framework of your circumstances, and diversification is crucial.
*Taxes and cost matter. It’s not what you make, it’s what you keep! We watch expense ratios, and practice tax-aware strategies in the context of your personal situation.
Market volatility will stick around whether Rip is sleeping through it or not, conflicts escalate or headlines predict more doom and gloom. When this happens, it’s important to remember that the desire to “do something!” in a crisis often leads to costly overreactions. Please never hesitate to call us. And lastly, if a group of mysterious Dutchmen ever offer you a drink in the forest, think twice before imbibing.
