Ukraine Invasion: Seeking (and Finding) Reassurance in Troubled Times
You won’t be surprised to hear me say that this isn’t the time to upend your well-laid plan.
Editor's note: Read the latest on how Russia's invasion of Ukraine is affecting the global economy and what it means for investors.
With Russia's invasion of Ukraine on Thursday, it seems tone deaf to not comment on it.
As you probably do, I feel numb and helpless as I watch the invasion unfold on my television set and computer. I’m hopeful economic sanctions will have some effect, but I’m realistic that they may well not. (After all, it’s not as though Putin didn’t see them coming, and he went ahead all the same.) Most of all, I’m thinking of the people of Ukraine and praying that as few lives will be lost in this unnecessary conflict as is possible.
Not surprisingly, the Ukraine invasion has roiled markets, layering additional losses on top of the losses stocks incurred in the months prior. The Morningstar U.S. Market index is now in correction territory—meaning a drop of 10%--and technology stocks are flirting with a bear market, with declines approaching 20% since highs reached in late 2021. Perhaps more surprising, a U.S. 60/40 portfolio—60% S&P 500/40% Bloomberg Barclays Aggregate Index—is closing in on correction territory, too.
If there’s anything reassuring in this sea of red ink, it’s that stocks still have double-digit gains over the past 3-, 5-, and 10-year periods. Moreover, these kind of market declines are incredibly commonplace. My colleague Jeff Ptak points out that the U.S. 60/40 has had declines of 10% or more in 22% of rolling 12-month periods over the past 30 years.
Thus, you won’t be surprised to hear me say that this isn’t the time to upend your well-laid plan. I think of Jack Bogle’s many exhortations to resist the urge to trade in times of turmoil. "Don’t just do something, stand there!" he would say. And then there’s my personal favorite: "Don’t peek." I’m reminded that volatile markets aren’t the enemy, but selling without a plan is.
If you feel like you’d like to do something to ensure that your portfolio is on the right track, check out my checklists for volatile markets. I’ve created one for retirement savers who are still working and one for retirees.
I’m also reminded that no investment is risk-free, and that includes cash, especially in an era of rising inflation. If you don’t take risk in your portfolio, you’ll face the biggest of all risks, falling short. The best you can do is to understand the risks of each asset type and then create a portfolio of investments that aren’t all risky in the same way.
And once you’ve done that, the only course is to “press on regardless.”