From the Desk of Dr. Gene W. Henssler:
I didn’t know it would be coronavirus, but I knew it would be something. That’s why I have 10 years of liquidity in my portfolio. If you were a client of ours, you would too.
There have been 16 bear markets (declines of 20% or more) since 1929—roughly one every six years, lasting an average of 22 months, with the average decline being around 39%.
These things always come from out of nowhere. One month, builders were selling six houses, the next zero. The Financial Crisis of 2008 had the market down more than 52%.
Between 1995 and 2000, the NASDAQ rose around 400% with a P/E of 200. No one seemed to be bothered. Even in 1999, the NASDAQ rose 85.6%, and the S&P 500 rose 19.5%. What happened? The market fell 49% after 9/11 happened.
Other “Crises”
- Financial Panic of 1987
- Nixon Resigns – 1970s Recession
- Cuban Missile Crisis – 1962
- Berlin Wall – 1961
- Sputnik – 1957
ALL OF THIS HAPPENED IN MY LIFETIME.
Why should anyone be surprised that conditions change? I know—“It’s different this time”—it always is.
I know something else—the market always comes back.
The worst thing you can do is to sell. Because, that means that you know where the bottom is. You don’t, and neither do I. But I do know that when the market turns, you better be there. The first year after the bottom, the average market increases by 47%. If you sell perfectly, when do you buy? When the market goes up? Who knows if it is a dead cat bounce or the real thing? Chances are you will buy well after the market takes off and miss a large part of the market gain.
I know I’ll be in the market at the bottom because I didn’t leave it.
Every time you see published market returns for a period of time, they assume you were in the market the entire time, not selling low and buying high.
Last year, recognizing the market was high, our Associates sold stock to buy fixed-income investments to get our clients to 10 years of liquidity. We also bought money markets that only invested in U.S. Treasury bonds and Treasury-backed securities. While our clients may have given up a little income, they can cash them in at any time and not pay a penalty. The current problems you have heard about with liquidity in money market funds are those invested in non-government backed securities, which can ask you to wait 10 days for your funds, or pay a 2% penalty.
If you have questions or need assistance, contact the Experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
- Join the Conversation in Our Coronavirus Facebook Group
Disclosures: The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
