What a difference a few months can make in the stock market

What a difference a few months can make.  Back in late-January, equity markets had gotten off to a rotten start to 2016. Just 3 weeks into 2016, major indices were down close to 10% year-to-date. The media was talking about "bear markets" and "corrections". Everyone was worrying about the impact of low oil prices and China's economy on global equity markets. 

On 1/22/2016, we corresponded and/or spoke with every one of our wealth management clients about the recent market activity and how they were feeling about their portfolio. Everyone came back with the same answer - they understood that equities can be volatile even in short amounts of time, but were OK with their portfolio and no changes were needed. Clients who were retired and spending down their portfolio or who needed cash for an upcoming major purchase were fine because we had the next 2 years of funds sitting in cash for them. And everyone understood this was the inherent risk of investing in equities and why we have diversified portfolios that are in line with the amount of risk they're comfortable with.

Attached are 2 PDF files listing the year-to-date performance of all Dimensional Fund Advisors (DFA) mutual funds:

1. 1 is as of 1/22/2016, and
2. 1 is as of 4/27/2016.

As you can see with the 1/22/2016 report - we were just 3 weeks into the year and it was horrible (look at all the red). Yet just 3 months later, look at the 4/27/2016 listing of the same funds.  The differences are striking. Only 2 funds have negative year-to-date returns. Everything else is in the black, and by a large margin in many instances.

We're not making any predictions about future performance. As we know, risk and return are related. These past few months have been an excellent illustration showing that markets can change rapidly.  As always, we advise that the proper way to address this is by having a diversified portfolio, taking the appropriate amount of risk you're comfortable with, and if you need funds from your portfolio in the next 1-2 years to keep those funds in liquid cash.

If you have any questions about your portfolio or anything else regarding your planning, please let us know.  Thank you!