In an effort provide our clients with timely advice, Pinnacle is adopting a new initiative whereby each month we will focus on a specific topic. Throughout that month, we will deliver topic specific content, and for March, we are discussing risk. Today’s weekly market commentary examines the role risk plays when investing and reminds investors the case for staying invested through volatility.
Risk is a part of investing – we all know this. It can be limited – it can be defended against – but it can never be eliminated.
When investing, risk refers to the possibility that the actual return on an investment will be different from what you expect. This includes the possibility of losing some or all of the original money invested. As an investor, it is important to have a well-informed understanding of how much risk you are able to take on and tolerate while still being in a position to achieve your financial goals. All of that is to say is that the risk management of your portfolio should be based on your specific financial needs, not generic industry parameters. (Just as we have reminded you in the close of this email for the past 5 years.)
To illustrate this point, page one of the enclosed chart shows the largest intra-year declines of the U.S. Stock Market (as measured by the S&P 500 Index) versus the year-end total returns. The chart goes back thirty years, and the largest decline in any given year is represented by the blue bars. The annual total return for each year is then represented by the green bars. As can be seen, not all, but most years experienced a double-digit intra-year decline. However, as the piece explains, “despite intra-year volatility, the S&P 500 Index had positive year-end total returns 24 of the last 30 years.” – INTRA-FL-0226
So to close, and as a reminder, the goal in investing isn’t to eliminate risk. It is to make sure your risk level aligns with your goals, timeline, and overall situation while taking a long-term view.
We would ask that you review the attached piece at your convenience and please let us know if you have any questions or if you would like to discuss it further. And as we always end this correspondence, please remember that regardless of current momentum and regardless of the key takeaways in this weekly perspective, we will continue to monitor and manage with a thoughtful approach based on your specific long-term objectives. Thank you for your continued confidence and look forward to speaking soon.
