As 2021 Approaches

To our valued clients and friends,

As we start looking into next year, we would like to take a moment to reflect on the lessons learned this past year as well as think ahead to 2021. 

We've always known we were very lucky to be small business owners working on behalf of clients that we enjoy and respect. This year has brought that into even sharper focus for us. As difficult as this year has been, it's been very fulfilling to be able to navigate these uncertain waters in the company of such resilient and thoughtful people. We truly appreciate every phone call, Zoom meeting, and masked encounter we've shared with you this year as we each do our best under trying circumstances. 

This year has been a gut check for all investors. For the first time in 11 years, US equity markets entered bear territory (20% from the recent high-water mark). Bond markets have been rattled by government measures to make money "cheap" in an effort to minimize the length and severity of this recession. On top of that, the reason for financial turmoil was a threat none of us have faced in our lifetimes, a deadly virus we can't see and don't have a vaccine or a cure for. Whew.

Stay invested long enough and you'll go through several world-altering events. Consider everything that's happened in the last 50 years:

Chart provided by Dimensional Fund Advisors

From 1970 to today, the S&P 500 entered correction territory (down 10% or more from recent highs) 26 times. Of those instances, 6 times the index was down 20% or more. Each of these situations would be valid reasons for an investor to become fearful to some degree. When these "surprising" events happen with such regularity though, it's up to us to be prepared for them. How do we do that?

With this in mind, we should always expect volatility in the short term. Not because we might have a global pandemic. Not because our feelings about a particular president. Not because we think a certain part of the market looks overbought. Simply because the world is unpredictable! Stocks are a lousy vehicle for short term money, especially emergency funds. 

Once short term money is out of volatility's nasty blows, what's left is long term money. It's critically important that we work together to define how much risk you're willing to take with that long term money while your portfolio is not in crisis. The market has a history of rewarding long term investors - see the chart above - but you only reap the benefit of long term returns if you can stay invested through the good, the bad, and the ugly.

Please reach out to us to talk about your individual situation and make sure that if the market was down 30% tomorrow, you would be at peace with how your portfolio is allocated today.

Before we wrap up, two quick reminders:

First, in the last 12 months there have been two major pieces of legislation that could affect your taxes: the SECURE Act and the CARES Act. If you exercised the ability to take special distributions from a retirement account or suspend your required minimum distributions, please make sure you're clear about how that will affect your 2020 taxes and what actions you need to take in 2021. Call us!

Second, we are encouraging our clients that have an account on the National Financial Services platform to consider e-Delivery for certain documents. If you want to explore this option or need help getting set up, please get in touch.

We're holding you all close in our hearts this holiday season as many of us struggle with missing a family member or friend that has passed this year, special occasions that don't feel the same on a video chat, and the knowledge that we're not out of the woods yet. We will get through this together and we're here to help you any way that we can. 

Be well,

Andy & Hannah