Let's jump in the DeLorean and rewind the clock 12 months.
A year ago today, 2016 was well underway and you were probably fueled with optimism about the upcoming year….
Then your January portfolio statements came…..and your optimism turned into a sneer of contempt as you realized you had 10% less money than you had 6 short weeks ago…
If your panic made you foolish enough to "look into it," you encountered headlines like these:
Sell everything! 2016 will be a 'cataclysmic year,' warns RBS
Dow Tumbles 391 Points Amid Global Rout
Stock Market Ends Sharply Lower as Worries About Economy Surface
Stocks dive to lowest level in nearly 2 years
Last January was one of the worst starts to a year in recorded history. From December 4th, 2015 to January 15, 2016 the Dow dropped 1859 points! And don't forget that from December 2014 to December 2015 the market was flat.
So for a year you didn't make a single penny and THEN you lost 10% in 6 weeks!
The sky was falling!
My days were consumed reassuring clients to hang in there and convincing them it wasn't time for canned food and shotguns.
Fast forward 12 months and guess how much the Dow has rebounded from its low.
Go ahead. Take a guess.
25%! The Dow is up 25% from it's low 12 months ago. That's 4,000 points! (Aren't you glad you hung in there?)
This is not uncommon. The market gods force you to EARN your returns by testing your faith. First they make you miserable. And then they pore salt in the wound.
If you're still standing after that they will reward you. And usually they will reward you handsomely.
The misery-reward cycle happens over the long-term AND short-term. We just had our long-term faith tested. There were also big tests in the 70's and 30's.
But if you had the fortitude to stick to it, you still would have received an average annual return of about 10%. (Market-timers would have received only about 5%.)
Having faith and sticking to your investment plan is what he was referring to when Warren Buffett said "Investing is simple - but it's NOT easy!"