The Broader View Is Brighter When You Pull Back The Lens

To say that the last few weeks have been challenging is perhaps the greatest understatement ever. Global markets are roiling as the novel coronavirus pandemic continues to pick up steam, forcing schools and businesses to close, interrupting daily life, and causing anxiety among investors who are forced to watch volatile market fluctuations day after day–all while we’re confined to our homes without constructive outlets to ease these concerns.

During times like these, it is very difficult to keep things in perspective when it feels like the world is burning around us. And yet, that’s exactly what we should be doing. Investing is a long-term exercise, and although selloffs like this are scary, we should be looking at our long-term plans and long-term potential for portfolio growth.

As the great investor Benjamin Graham once said, “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.” Graham went on to say that many individuals fail as long-term investors because “they pay too much attention to what the stock market is doing currently.” Ultimately, he felt that intelligent investors were patient, independent, and exerted self-control during difficult times.

To illustrate Graham’s points, let’s look at a few investment examples historically.

Objectively, the above examples appear to be poor investments. If these investments were sold at the end of the periods represented on the charts, returns would have been -55% and -20%, respectively. The next chart illustrates an investment with a more favorable outcome than the prior two examples:

Investment 3 looks to be leaps and bounds better than Investment 1 and 2. What’s most interesting about these investment options is they’re actually the same underlying stock index, the S&P 500, but over different time periods.

The purpose of these illustrations is to show that over shorter time periods, assets will fluctuate in value and could have extremely negative performance. In fact, periods of market declines are more common than we may think. Since 1980, there have been 12 corrections (stock declines of 10% or more), 8 bear markets (declines of 20% or more), and 5 recessions.

Herein lies the importance of “pulling back the lens.” Although it is never ideal to see negative performance in an investment portfolio, we know that periods like this occur and that historically, markets tend to grow over the long-term. This is exactly why we maintain a long-term horizon when investing.

By holding a diversified portfolio that matches risk tolerance and making rational decisions that are focused on long-term goals, investors improve their likelihood for success. Historically, the longer an investor maintained their allocation, the greater the chances the portfolio offered positive returns. While the odds of positive returns equate to a coin flip each trading day, we feel that over time, the portfolios we’ve implemented will show positive results. While investors focus on darker snapshots in time that prove painful, pulling back the lens most often shows a much brighter picture. As Winston Churchill would explain, “If you’re going through hell, keep going.”


  1. Zweig, Jason. “What Benjamin Graham Would Tell You to Do Now: Look in the Mirror.” The Wall Street Journal. Dow Jones & Company, March 10, 2020.
  2. “Talk to Clients about Market Downturns: Vanguard Advisors.” Talk to clients about market downturns | Vanguard Advisors, January 27, 2020.

Past performance is no guarantee of future results. All investing is subject to risk, including the possible loss of money you invest. Fluctuations in financial markets could cause declines in the values of your account. There is no guarantee that any particular asset allocation will meet your objectives.
Various asset classes are represented by the following indices using data from certain dates (in parenthesis) up to the end of December 2019: US Large Cap – S&P 500 Index (January 1950), International Developed – EAFE Equity (January 1970), Emerging Markets – MSCI Emerging Market Index (January 1988), US Aggregate Bonds – Bloomberg Barclays US Aggregate (April 1996)
Past performance does not guarantee future results, which may vary. The indices are unmanaged and the figures for the Index reflect the reinvestment of dividends, but do not include any deduction for fees, expenses or taxes.

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