Top

Dimensional Perspectives

Dave Goetsch standing on the set of The Big Bang Theory

Seeing all the recent headlines about the sudden downturn in the stock market has transported me back to February of 2009, when I was close to despair. It’s striking how different I feel now. 

In February 2009, the stock market was down around 50% from its high, and everyone seemed to feel like the sky was falling. I was familiar with this state of panic because my relationship to the financial markets was that I didn’t trust them. 

They were always going up and down in ways no one could predict, and I couldn’t trust those folks who said that they could anticipate what was going to happen. So when the market went down, I went down with it—sinking into a depression, knowing there was nothing I could do.
What a difference nine years make. I haven’t changed because the stock market rebounded. I changed because I learned that there was a different way to think about investing. I was right not to trust those people who thought they could predict what was going to happen in the markets, but I was wrong in thinking that there was nothing to do. I’ve learned that I can have a great investment experience if I just accept a few simple truths.

I have to understand the uncertainty of the market. The stock market, as measured by the S&P 500 Index, has returned about 10% per year over the last 90 years,1 but there are very few individual years in which it has ever actually returned that amount. In fact, how many of those 90 years do you think the S&P 500 was up more than 20% or down more than 20% for that year? The answer is 40. Astounding, right? I wish somebody had explained that to me decades ago. Then I would have known to look at stock market returns in terms of decades—not years, months, days, or hours. I would understand that so many of those articles and cable news pieces are just noise, designed to keep an audience obsessed and unsettled.

I haven’t changed because the stock market rebounded. I changed because I learned that there was a different way to think about investing.

In order to be a long-term investor, you have to have a long time horizon. This can be hard to remember when you’re being assaulted by noise, but if you can stay strong, the results are stunning. By results, I don’t mean the investment returns, which hopefully are good. The return I’m talking about is how I feel every day. I worry less—not just about the future, but also about the present. Of course, I know that there are no guarantees when it comes to investing, but I feel like I’m going to be okay. I have a plan. 

There’s no way I could’ve done this without a financial advisor. I needed someone who could not just talk me through what my asset allocation should be, but also help me work through how I felt about investing and what exactly I could do to change my perspective. 

I was a mess nine years ago. Now, my outlook is totally different. The markets haven’t changed; they still go up and down. The difference is, I don’t anymore.

Previous Post
Next Post

1. S&P data © 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. 

 

 


WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED

Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067).


WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.

Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. Company Number 02569601. DFAL is authorised and regulated by the Financial Conduct Authority (FCA) - Firm Reference No. 150100.


DIL and DFAL as applicable, (each an “Issuing Entity”, as the context requires) do not give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision. Please read the ‘Important Information’.


The Issuing Entity issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from the Issuing Entity will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.


This material is provided for information purposes use only. It does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Any entity responsible for forwarding this material to other parties takes responsibility for ensuring compliance with all financial promotion laws, rules and regulations. It is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material have been obtained or derived from sources believed by the Issuing Entity to be reliable, but the Issuing Entity makes no representation as to their accuracy or completeness. The Issuing Entity has reasonable grounds to believe that all factual information herein is true as at the date of this document. The Issuing Entity accepts no liability for loss arising from the use of this material.


“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Ireland Limited, Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.


Indices are not available for direct investment, therefore their performance does not reflect the expenses associated with the management of an actual portfolio. 

An affiliate of the Issuing Entity pays Dave Goetsch for consulting services. The Issuing Entity does not endorse, recommend, or guarantee the services of any advisor. The experience of the author may not be representative of the experiences of other individuals. All expressions of opinion are those of the author and are subject to change. 

RISKS

Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.