Where Have I Heard This Before?

Photo by Priscilla du Preez

Photo by Priscilla du Preez

Gary R. Matthews

 

The markets are gyrating again, and whether you are an SRI client of mine or not, if you are looking and noticing the latest market news, that queasy feeling in your stomach might be happening again as well. When the markets gyrate, our portfolios do too. It’s called volatility, and most investors are not very comfortable with it.

 Lately, we’ve been a bit spoiled. Market volatility, until 2018 (and especially in the last two months), has been relatively tame while trending up in recent years, making it easy for investors to focus on other life matters, knowing their portfolios have been doing fairly well. Yet things never really stay the same for very long, and now the markets seem to mirror the nation’s ongoing political chaos.

 As an investor, the queasiness you might well be feeling now represents one of the most significant dangers you face financially. Times like the present are when undisciplined investors (assuming they are long-term investors) begin to think about moving their assets out of the stock market to “avoid the worst.” They are typically operating out of fear, and that same fear usually prevents them from getting back into the market when prices are lower. Add to this the fact that we can’t really predict where the markets will go from here (and nothing we can know about the current state of the economy, world politics, or investor sentiment in general can help us with that) and most often, investors who bail out when they get nervous cost themselves money, sometimes a lot of money.

 So, if you are one of those nervous investors, take comfort in the accompanying graphs, showing the long-term performance of the S&P 500 Index and the Dow Jones Industrials Index. The values of successful companies as a whole tend to go up, and have, for over 100 years. There are bear markets periodically, but the long run trend is up, and for good reasons. Successful, well-run companies have well-defined

DOW Jones 100 year historical chart

missions and talented, creative, innovative employees who implement them. Creative people add value.

I believe this is especially true and reflected in well-diversified SRI portfolios. Well-constructed SRI portfolios are made up of companies that are forward looking, take care of their employees, and seek to contribute to a more sustainable and just world (or, at least, to minimize any damage caused) through their business practices. Those are the companies most likely to succeed and to become more valuable in the future.

 There is much uncertainty in our complicated world, and sometimes the markets reflect that, especially in the short term. Will the markets always trend upward? Will we have that sustainable and just future world we aspire to? We can’t really predict that, but we can bet that well-constructed and diversified SRI portfolios will consist of those companies with those employees that will most likely be instrumental in getting us there. These are the best investments there are. So, hang in there. And yes, you’ve heard me say this before!