It’s hard to believe it’s been a decade since Lehman Brothers filed for Chapter 11—still the largest bankruptcy in U.S. history and one that triggered a swift and steep decline in the market. From September 2008 through February 2009, the S&P 500® Index fell more than 40%.
The ensuing years have seen the longest bull market ever, but many investors still feel a sense of trepidation. That’s why we’re such big proponents of our 7 Investing Principles, which apply in good times and bad.
Take investing principle No. 1: “Establish a financial plan based on your goals.” According to our 2018 Modern Wealth Index survey of 1,000 investors, 78% of those who created a financial plan before or immediately following the Great Recession reported more savings than those without a plan, and 60% felt more confident in their ability to weather another recession.
Of course, having a financial plan helps only if you stick to it—even when markets are surging. If you let your winners run for too long, you may end up overexposed when stocks eventually come back down to earth. For example, a hypothetical portfolio of 60% stocks and 40% bonds in March 2009 would have drifted to 83% stocks and 17% bonds by June 2018 if it had been left unattended.1 Regularly rebalancing your portfolio—a.k.a. principle No. 6—can help keep your level of risk within comfortable limits.
For many people, investing is an exercise in patience and fortitude. If you ever need help keeping your head when the going gets tough, give us a call or stop by your local branch. We’re here to help.
President & CEO
1“2008 Market Crash: Would the 7 Investing Principles Have Helped Investors?” schwab.com, 09/11/2018. Past performance is no guarantee of future results.