TIMING ISN’T EVERYTHING

Source: LPL Research, FactSet

This leads me to another point on not selling a position or your entire portfolio when you see a loss – that the loss is only realized when the positions are sold. Brasada’s research approach helps us to see through the noise and to focus on what is actually newsworthy to the companies that we own. Is the market’s move due to something that will break our thesis on why we own the company? If yes, then we can act accordingly. If no, then we believe that the market’s fluctuations will soon subside and then the true value of the business as we see it will reflect in the stock’s price. This is one of the big differences in investing vs. trading. The latter will get caught in the headline news while we can remain steadfast throughout.

Not only does staying invested help to improve your long-term returns, it also helps to limit the volatility of your portfolio’s performance. As you can see below, investing in stocks for only one year can have a wide range in the total return – anywhere from a 52% gain to a 37% loss. As the portfolios holding period increases, we see that range decreases significantly. A well-balanced portfolio, invested over a long-time horizon is the best way to mitigate your risk and improve your odds of success.

To bring this full circle, let’s illustrate the true value of long-term investing. According to the CDC, the life expectancy in the US was 78.4 years in 2023. Let’s say that on the day you were born in 1945, your parents put $1,000 into an account for you and invested it in the S&P 500. Although they were generous, they were a bit forgetful, because you didn’t know about this account and therefore it was left undisturbed until 2023. At first, you’re upset that you didn’t know about this money for all those years. Then your anger would be assuaged once you look at the account balance and see a few more commas and zeros. Over those 78 years, assuming that all dividends were reinvested, that gift from your parents has grown to $4,566,292.96 – a staggering return of 456,529%. Putting that in annual terms shows the power of compound returns. Your annual return would have been 11.26% over that period, which is a number that certainly sounds achievable. It turns out that Albert was right about compound returns after all.

At Brasada, we don’t look for short-term gains or to act like day traders. We are looking for companies that we believe are leaders in their industry, with a solid runway to continue growing and whose value has insulation from the market’s ups and downs. This gives us a long-term lens. In fact, we have held some positions for our clients for over 20 years. Those stocks have performed incredibly well over that period. If we had listened to the voices on Wall Street and sold the stock based on some volatility in the market or because it had reached their price target, we would have left some returns on the table. By listening to our own research and by investing in the business rather than the stock’s price, we are well positioned to enjoy long-term success for our clients.

In the question of timing the market vs. time in the market, there is one clear answer. That staying confident in your convictions and remaining invested during times of volatility will lead you to long-term success. Time is on your side.

Company Update and Investment Outlook