LUTZ BUSINESS INSIGHTS
Fight or Flight – Lesson Learned
JUSTIN VOSSEN, INVESTMENT ADVISER & PRINCIPAL
PUBLISHED: MARCH 22, 2016
Imagine you had an extremely long hangover from a New Year’s Eve party causing yourself to have slept through the first two and a half months of 2016. Once awake, you would likely try to catch up on what you missed.
You would pick up a paper and might be somewhat surprised that Donald Trump is leading for the GOP nomination. On the other ticket, Hillary Clinton is being challenged a bit on the Democratic side. You would be saddened to hear that David Bowie, Harper Lee, Antonin Scalia and Nancy Reagan passed away. Aside from that, you may be less surprised to see that the Middle-East is still a mess, prices at the pump are about the same, and that things in general had changed very little.
You then pull up your investments on your computer to find that they had barely changed since you had been sleeping. Maybe a slight increase, ho-hum. “Not much happened in the financial world,” you might wonder.
However, somebody mentions to you that the first two weeks of January were the worst first two weeks of a year in the S&P 500’s history, returning -7.93% through January 15th. Befuddled, you pull up a graph of the time you missed, and the S&P 500 is slightly positive as of March 17th 2016. You look at the prior days and realize that many indexes had fallen 10-15% at any one point during the beginning of the year.
Wall Street Journal Online: 3/18/2016
Perplexed, you begin to Google stories from those days when the market was falling. You want to know what happened. You find stories such as these:
- CNN Money: Sell everything! 2016 will be a ‘cataclysmic year,’ warns RBS. – by Jim Boulden 1/12/2016
- Fortune.com: Analyst: Here Comes the Biggest Stock Market Crash in a Generation – by Chris Matthews 1/13/2016
- Bloomberg Business: So Yes, the Oil Crash Looks a Lot Like Subprime – Tracy Alloway 1/25/2016
- CNBC.com: Why the Market’s Drop May Just Be Getting Started – Alex Rosenberg 1/20/2016
- The Washington Post: The Crash of 2016? – by Robert Samuelson 2/10/2016
These are just some headlines from “reputable” news agencies. Unfortunately other “news” sites that come up on Google, which I would refer to as “click-bait”, promoted even more troubling headlines. These headlines are written so salaciously so that you to succumb to your fears and subscribe to their newsletter or buy their gold at inflated prices.
Seeing all of this after your long slumber makes you understand you missed the drop, the panic, the handwringing, and the subsequent recovery. However, the results of your portfolio look as if very little happened. Emotionally, you would have been better off for taking that long nap than if you would have been awake. What would you have done if you panicked when the rest of the world seemed to be in January and February? Sold, and locked in a loss?
It’s our nature to try and “do something” to avoid being hurt or to defend ourselves. Our fight-or-flight instinct is hard wired within us. It comes from our hunter-gatherer ancestors who roamed the Savannah Plains 200,000 years ago. However, if we understand that this instinct is within us and others, we can choose a better alternative. While I don’t recommend sleeping through it next time, we can be better prepared when panic inevitably ensues again. Let the others fight or run at their own peril. Make a plan to hold your ground or take advantage of the panic and be better off mentally and financially for it.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.
ABOUT THE AUTHOR
JUSTIN VOSSEN, CFP®, NAPFA + INVESTMENT ADVISER, PRINCIPAL
Justin Vossen is an Investment Adviser and Principal at Lutz Financial. With 21+ years of relevant experience, he specializes in providing wealth management and financial planning services for high net-worth families, business owners in transition, endowments and foundations. He lives in Omaha, NE, with his wife Nicole, and children Max and Kate.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- CERTIFIED FINANCIAL PLANNER™
- National Association of Personal Financial Advisors, Member
- Financial Planning Association, Member
- BSBA in Economics and Finance, Creighton University, Omaha, NE
- St. Augustine Indian Mission, Board Member
- Nebraska Elementary and Secondary School Finance Authority, Board Member
- St. Patrick's Church, Trustee
- Mount Michael Booster Club Board
- Lutz Gives Back, Committee Chair
- March of Dimes Nebraska, Past Board Member
- The Current Financial Health of the American Consumer
- A 100-Year Bet Gone Bad
- Personal Finances: Focusing on What You Can Control
- Planning for College Pragmatically
- Remaining Calm When Uncertainty Surrounds Us
- Am I Ready to Retire? Finding Your Sweet Spot
- 5 Retirement Strategies for Small Business Owners
- Outsmarting the Ivy League?
- An Investor's Year-End Wrap Up & Tax Prep
- Nobody Knows Anything
- Add "Brexit" to the Long List of Uncertainty
- Financial Planning for College Grads
- Fight or Flight - Lesson Learned
- Social Security: The New Rules
- Putting Volatility in Context
- The Asian and European Fronts
- Bubble Looming or a Bubble Popped
- Re-Emerging Markets?
- A Market Perspective
- Timing is Not Everything
- "Yellen" at the Fed
- Mind What Matters...Focus Efforts On What You Can Control
- What to do With a Financial Windfall
- Love Indexes - Hate the Indexes
- Do I Own a Market?
- A Practical Primer On Volatility
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