Page 119 - July 2022

Taking a look at the company’s management, their business plan, if they are profitable, and past performance of the stock are all great indicators that can lead to a justified decision.
FINANCIAL PLANNING
The chart below shows you the history
of bull and bear markets. Bull markets are
in blue and bear markets are in gold. I love this chart because it tells an incredible story about the history of the S&P 500, which is
a commonly referred to index that contains 500 large U.S. based companies. The average bull market has lasted 4.5 years dating
back to 1942 with a cumulative total return
of 153.7%. On the contrary, the average
bear market has lasted 11.3 months with a cumulative loss of -32.1%. The gold periods are much, much shorter than the blue periods.
Investors get very concerned during the gold periods. I constantly hear, “This time is different.” There will always be something going on in the world to stir up the markets and cause investors to sell. The very best investors don’t let their emotions get the
best of them during the gold periods. They understand that it’s part of the normal market cycle and historically, markets have recovered every single time.
It’s not uncommon to be attached to an investment either. I’ve seen clients hold onto a stock for much longer than they should
have because it was gifted to them or because they have some sort of personal attachment to it. I can certainly relate to that with horses we raise: from the time we see their first day in this world to the moment when someone else purchases them at a yearling sale. It can be a unique feeling to let a yearling go like that, even though it might be the best thing for the ranch.
Same goes with your portfolio. Distinguishing between when to sell and when to stay invested is an important factor in being an investor.
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