...Let’s Look At Its Trees

See the forest for its trees,’ is a platitude that irritates me to my core. It’s one people tell me when I am so fixated on specific details that my judgement becomes clouded. Last summer for example, I had a problem with my car that took many weeks to diagnose, then repair. During those vexing few weeks, I scoured car dealer websites relentlessly. As a result of this severe, but ultimately curable issue, I was convinced I needed to sell my car that otherwise brought me an immense amount of joy. In its place, I planned to purchase a “predictable” automobile, because I assumed this type of car would never spur the same degree of agitation I felt at the time.  

Begrudgingly, I toiled to see the forest for its trees. I waited for the repair to be complete and ended my search for a replacement vehicle. Today, I can admit that as I pulled away from the mechanic, I remembered why I bought this car in the first place. Had I opted to sell my car, I would likely be experiencing a level of frustration, similar to those agonizing few weeks, but on a daily basis, indefinitely. The platitude was right, I needed to see the forest for its trees.

You don’t care about my car problems, I know that. But this month’s market turbulence is akin to my month of car trouble. As I write this, the S&P 500 is down about 7.5% since January 4th. (The first trading day of 2016) Headlines are blaming the slide on declining oil prices and slowing economic growth in China, among other triggers. Instinct says, it’s time to unload the equities in my portfolio for something more predictable. However, logic speaks to the contrary.

Logic says, see the forest for its trees: Look at your financial plan and its underlying investments. They’re going to experience volatility, because that volatility is a catalyst for growth. Your portfolio is designed to harness volatility, helping your plan generate enough momentum to eventually fulfill your goals; bring you joy. Right now, I expect you’re feeling tense, uncertain, and maybe even dubious of how your goals (that joy) will ever be attained in this climate. You want to sell the car that’s at the mechanic for one you hope will alleviate these unsettling feelings, but only in the moment.   

During these periods, you must do your best to see the forest for its trees. By being patient and knowing that this turbulent stretch will pass, you are granting yourself the opportunity to capture that joy you had in mind when we designed this plan originally. Seeing your portfolio for its purpose, a vehicle to arrive at your goals, separates its near-term behavior from its long-term function. When your goals shift and that vehicle is no longer practical to get you to where you want to go, then we talk about making a change. Maybe your mix of stocks and bonds will have become too volatile for a particular moment along the timeline of your plan. At that point, we would buy or sell, but based on your objective, not the market.

Separating market volatility from your plan is no simple task. You are only human and we understand how unnerving this month has been. 

1 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.