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The Cycle of Investing

The Cycle of Investing

January 26, 2022

When markets fall, it's easy to forget that downtrends are part of the investing cycle. So when prices slip, it's an excellent time to review some standard terms that you may be hearing that describe today's financial markets.

The first is "pullback," the mildest form of a drop in the markets. You might hear a market commentator refer to a dip of 5% to 10% after a peak as a pullback.

The next term is "correction," used when markets drop 10% to 20% after a peak. Then there is a "bear market," where the drop is 20% or more since the last peak.

When prices are trending lower, it's easy to second-guess yourself. But over the years, I've found that doesn't help and can prove to be catastrophic.

Remember, at Echelon, I've aligned your investment strategy with your goals, time horizon, and risk tolerance unique to you. I've built your portfolio, anticipating that there will be good times and bad. To realize the portfolio's potential, staying disciplined is critical. If you find yourself thinking, "this time, it's different," please reach out as soon as possible. It's essential that you feel comfortable with your allocation and approach, and I'd be happy to talk with you.

Down markets keep you honest and are a terrific time to re-assess your risk tolerance. It's always enjoyable in an upmarket, and every advisor and investor is a hero. But, when the market is down, they typically retreat emotionally, and that's typically when Echelon's intrinsic value shines, saving investors from themselves.

It's crucial to find your "happy" medium to smooth out the peaks and valleys. Your risk score should be the same in an up and down market, very rarely changing it. We don't time your emotions; we smooth them out. So if you'd like a reassessment of your risk appetite, please let me know.

Last food for thought, Asset Management is not easy. Be realistic with your expectations and be careful of keeping greed in check! Sleep well at night knowing the due diligence, hard work, and thorough research established the best plan possible for your situation. The success comes in the execution. We must stay focused on the flawless execution of that plan. The only way to do that is to remain highly focused, disciplined and controlled. Not easy, but what differentiates good from wrong investors and good from bad advisors.

The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.