“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” This is a quote by famed Fidelity investor Peter Lynch. The annualized performance of the S&P 500 over the last seven years is 6.7% (thru 7.30.14). This includes one of the sharpest downturns in the last century. However, for those that held strong throughout that downturn, patience paid off and Peter Lynch’s quote was once again validated.
At Windsor, we don’t try to “guess” the direction of the stock market. Warren Buffett has stated many times that he doesn’t know what the market will do next week, next month or even next year, but over the long-term it trends up. For our clients, risk management is achieved by developing and maintaining your proper allocation, as well as systematically rebalancing.
As the markets decide the timing and extent of any type of pullback, we recommend reading the post below entitled “Swimming Against the Tide.” Making sure the allocation of your portfolio matches your needs and risk tolerance is what separates a roaring forest fire from a controlled burn. Both can spawn new growth, however recovery comes quicker from the latter.