Many economic issues factored into the 40 percent drop in the U.S. stock market just over a decade ago. Since 2008, investors have been rewarded for patience, benefitting from strong overall stock market returns.

The last quarter of 2018 experienced a jolting stock market sell off with stocks down nearly 20 percent in just three months. Again, many economic issues factored into the year-end decline. The first three months of 2019 have been solid for patient investors as the stock market has rebounded off the December 2018 low point.

Investing, like economics, revolves around patterns of events and behaviors. Depending on reactions to patterns, there can be positive or negative habits established. Developing positive investing habits is critical to short- and long-term success.

A common question I get is, “What triggered the 2018 year end sell-off?” The simple answer is that there were more pessimists than optimists. During the height of the sell-off, right around Christmas Eve 2018, $ 46.2 billion was taken out of stock funds in just one week. This amount was just shy of twice the net redemptions of any other week going back to 1992. So, a flood of stock sales led to a great acceleration to the downside that closed out 2018.

Frugal shoppers like sales and bargains. We like discounts, coupons, gas points, etc. I’m in that boat too. When markets go on sale, especially in such dramatic fashion as we just experienced, I’m in the business of trying to take advantage of these opportunities for clients by rebalancing from the bond side of a portfolio into the stock side. This tends to be a pattern worthy of repeating over and over again.

Selling into a market decline and then sitting on the sidelines while markets recover is one of the surest ways to lock in permanent losses. Thankfully we didn’t experience that dynamic with clients. I’m sure it comes to mind occasionally.

While the market has rebounded off the 2018 Christmas Eve lows, and rebalancing has been effective, there is a need to also rebalance back from a higher than desired stock allocation.

If an investor rebalanced and now their goal of 60 percent stock has risen to 70 percent, it might make sense to lock-in some gains and make adjustments. The rationale is that when (not if, but when) the next stock market downturn occurs, the 70 percent stock portfolio will fall more than the 60 percent stock portfolio. It is vital to remain in balance.

Since 1997, when I first entered the investment management/financial planning industry, a consistent lesson has always emerged. That is to invest carefully, remain optimistic, and understand that every single person looks at the concept of finance differently – some more closely, others more conservatively, and many combinations in between. Even married couples/partners look at personal finance differently. My wife and I are the same way. Yet, there needs to be a realistic consensus on overall goals – including retirement, and more.

The stock markets of 2008 and over the last few months have been quite a journey for investors.

Investing is a journey – one that, when the right partnership is selected, becomes a series of discussions focusing on many subjects. Within the context of this article, we can never forget that there will be times when stocks and bonds are down in value. These temporary declines, for patient investors, will be erased as markets recover.

The key is making sure your investment strategy is provided specifically for your own financial journey. That’s the emphasis our firm uses since we are fee-only. We strive to be “Partners in Your Financial Journey” as we don’t sell products, rather, we accompany our clients along the various paths a journey takes and in step with each unique need.

And with anything investment related, this is general advice as there is no one size fits all.

Ryan Fox, Huston-Fox Financial Advisory in Gettysburg, can be reached at 717-398-2040 or Ryan@hustonfox.com

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