Expect Volatility

Just the other day I heard Warren Buffet, superstar investor, say something that got me thinking. He said, “In the next 53 years, our shares will experience declines … No one can tell you when this will happen. The light can–at any time–go from green to red without pausing at yellow.”

Buffet has done well by investing thoughtfully and patiently over the last 50 years. This perspective, where an investor expects volatility, doesn’t necessarily mean pull all your money out of stocks and hide it under your mattress. Buffet’s guidance, in my opinion, is about prudence and planning.

Prudence tells us that stock markets tend to grow over the long term while being relatively volatile in shorter periods (Dot-com bubble, great recession, fiscal cliffs, Greek debt crisis, trade wars, etc). Planning helps us to use that wisdom to protect ourselves from the shock.

Sure, you’d expect that as a wealth management advisor I’d suggest prudence and planning. I’ll give you that. Kidding aside, it is hard to be shocked when, based on history, there is such a high probability of volatility.

We can’t predict when the next downturn will happen but we can prepare in ways that hedge against the potential risk. It starts with taking a realistic accounting of what is most important to you and your family both now and in the future, then making sure you get it right TODAY.

Now continue the conversation; talk with your family, with an advisor, and review your plan with the awareness of a potential downturn–while the markets are going up.

Data Source: Berkshire Hathaway 2017 Annual Letter to Shareholders.

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