The Whitnell Way

My daughter and son-in-law recently moved to Texas, taking our grandchild with them.  It was tough to see them go.  Even though we’ve visited them and enjoyed our time in Texas, it’s not the same as having them nearby.  They said to me that the opportunity for them was simply too good to pass up. 

Lately I’ve been reflecting on how I’ve made big decisions over the course of my life.  What I found surprising is that many of the same guiding principles that shape how I’ve made decisions in life also shape how I advise people to make decisions with their wealth.   None of us have a crystal ball to see the future and make perfect decisions every time.  But there is a guiding framework I’d like to share with you that I think can help you make decisions you probably won’t regret. 

In early January of 2018, the financial media watched in awe as the Dow Jones Industrial Average broke 25,000.  This event made national headlines.  The stock market defied skeptics, continuing its long run higher and rewarding investors with a gain of over 50% in just the prior two years.  Yet, the most amazing thing during this period was the S&P 500 producing positive results 14 months in a row.   This occurred with such an extremely low level of volatility that it was nearly unprecedented. 

Following these strong gains and with the return of volatility, you might be wondering if this is the time to change your investment strategy.  None of us want to miss out on the opportunity for attractive rates of return.  But there is a nagging feeling that the market can't continue to rise like it has.  Even stronger is the fear that that the market may drop again and give back its recent gains. 

Before you make any decisions about how to respond to this extended period of market growth, I'd like to provide some perspectives that have served our clients well for decades.

Since 2009, the markets have made huge strides. While most investors still remember the pain of 2007 and 2008 when the markets were way down, as the markets have risen, those memories are fading. For some who are invested in the market today, it’s fun again with stock prices moving higher. Even so, many remain worried that the markets will go down again.

Up. Up. Up. Down. Down. Down. It’s like a roller coaster. Emotional investors, those who make decisions based on short-term market swings, are often subjected to a difficult ride. When the markets go up, they feel better and buy. When the markets go down, they become more pessimistic and sell. Have you done this? Do you know someone who’s done this?

It has become more fashionable of late to say that you can’t get a square deal anymore in the United States. Whether from the political left or right, the message seems to be the same. If you work hard, play by the rules, pay your taxes, live within your means, invest for the future – in other words if you do everything right – you still may not be able to achieve the American dream.

The left likes to blame the one percenters. The right seems to suggest that somehow the entire system is rigged. Their message is that the odds are stacked against you, so why even try? The political candidates say, in so many words, vote for me and my party and we’ll fix it for you. We’ll give you back the dream. But do you really trust the government with your financial future?

Twenty eight years ago I was standing in the maternity ward at the hospital, holding the hand of my new-born daughter Jacki. She is the youngest of our three daughters. I’ll never forget the joy of that moment and the miracle of a new life, looking down into her tiny little face.

What I didn’t know, at that time, is that 28 years later I would be in yet another hospital standing by Jacki’s side. But this time, I would be holding her hand as she lay in the intensive care unit of a hospital for 12 days, unable to speak or open her eyes as a result of a traumatic brain injury.

The news these days concerning geopolitics and the global economy is worrisome to investors. The European Union is struggling to figure out how to get its economy growing while dealing with debt-laden countries like Greece and Spain. Russia and the Ukraine are engaged in what appears to be an endless conflict. On our home-front, all eyes are on the Fed as it moves toward raising interest rates. In the US, the administration and Congress are trying to decide how to respond to the brutal ISIS aggression in Iraq and Syria and a growing level of uncertainty and instability around the world.

This summer we got away regularly to the beautiful shores of Lake Michigan. My wife and I love to spend time there with our children and grandchildren. We enjoy visiting with family and friends and taking long walks on the beach. Our grandchildren love playing in the water and I must confess that making sand castles with them provides a certain undeniable pleasure.

Last week, as my wife and I were enjoying some time together on the beach, we saw a storm brewing on the horizon. Within just a few minutes the weather completely changed. A beautiful sunny afternoon turned dark and cold. The placid waters churned and grew rough. The warm breezes turned into tumultuous gusts.

If you’ve read my other articles, you may have noticed a trend.  I've pointed out that news reporting tends to focus almost exclusively on negative developments. It's all about ratings, of course, and unfortunately, bad news attracts a bigger audience. So that is what we get.

It seems nearly impossible to avoid the financial press. Whether at the airport, the gym, a hotel restaurant or even at home on TV, the financial press always seems to have the latest and greatest trend, idea, stock tip or other “must-know” information. Frankly, it can be addicting.

Today’s investors seem to have a rather high level of anxiety about where the stock market is headed next. This is understandable. While I do sympathize with this anxiety, it brings to mind an experience I had many years ago. As a young investment professional, I learned an important lesson about managing money for individuals. Risk is not something to avoid. In fact, it’s necessary. But defining the right risks for each individual investor – now that’s the real challenge.