The Importance of Investment Discipline | Mission Wealth

Chief investment officer at Mission wealth and today I’ll be discussing the importance of investment discipline investment discipline involves focusing on long-term fundamentals maintaining full investment and following a systematic approach to rebalancing strips out the effects of emotions on the investment decision-making process and may ultimately prove to better achieve the long-term financial goals of our clients we believe it is a critical component of portfolio management and vital to the success of any financial plan it is equally important to maintain discipline when times are good and when times are bad by focusing on long-term fundamentals and taking emotions out of the investment decision-making process investors can better navigate through Market volatility with confidence that their long-term Financial plans are secure 2020 was a prime example of the benefits discipline can bring to an Investment Portfolio in March and April of 2020 Global stocks were trading significantly lower than the highs experienced earlier in the year many investors let emotions get the better of them allowing the dire news headlines at the time to dictate their investment decisions and unfortunately sold out at the exact wrong time on the other hand we maintained our discipline in the face of increased volatility we didn’t react to the short-term Market noise or get sidetracked by the news headlines rather we focused on long-term fundamentals followed our disciplined approach to rebalancing and were broadly adding to stock exposures at that time this ultimately benefited our clients portfolios in the form of enhanced returns as the market eventually rallied back this chart highlights the importance of not allowing emotions to dictate investment decision making it depicts the growth of one thousand dollars invested in the S P 500 from 1970 to March of 2020. fully invested that 1000 would have grown to over a hundred and twenty thousand dollars however all too often investors sell out as volatility spikes and stocks sell off some try to time markets by selling with the view to get back in at the market bottom timing markets is impossible We Believe selling when stocks have sold off and volatility is peaking is precisely the wrong thing to do this is because the best stock market days often immediately follow some of the worst days that happened in 2008 and again into 2020 and invariably happens anytime the market experiences a significant sell-off missing out on these very strong stock market days is detrimental to long-term returns as the chart depicts had you missed out on the five best days since 1970 your total return would have been reduced by over minus 36 percent if you missed out on the 15 best days your total return would have been reduced by more than 64 and had you missed the 25 best stock market days your return would have been reduced by over 77 percent these numbers are significant clearly maintaining full investment over the Long Haul is key trying to time markets or allowing emotions to dictate investment decision making only degrades long-term investment performance and could potentially put your long-term financial plan at risk it’s important to remember that stock market investing typically involves episodes of gains losses and volatility within an overall upward Trend good times don’t last forever but neither do bad times periodic bouts of Market volatility should be expected over time they shouldn’t come as a surprise being prepared for these episodes and maintaining investment discipline may add to long-term total investment returns more often than not the best time to invest in stocks is when it feels most uncomfortable to do so ultimately by focusing on long-term fundamentals and not allowing short-term noise or emotions to dictate investment decision making we believe we can more effectively consistently achieve the long-term financial goals of our clients I’m Karen Osborne Chief investment officer at Mission wealth in this video discussed the importance of investment discipline for more information please visit missionwealth.com or contact your client advisor [Music]