This time a year ago, the stock market was taking a dive. Fear over the coronavirus pandemic had just set in. The borders hadn’t closed, and we weren’t working from home yet, but still, things felt off.
But after about a month where we saw low after low, the market turned around in late March and has been steadily climbing since. In fact, many indices were breaking records in recent months.
This week, though, we’re back on shaky ground. Stocks, and in particular, tech stocks, have undergone a bit of a readjustment. Even Bitcoin has taken a turn! Markets go up and down; it stands to reason that after months of up, up, up, the rally was going to run out of steam.
So, what’s behind this tumble?
It seems some experts believe higher interest rates and a move into stocks that will be buoyed by an economic comeback and the “reopening” of the world (thanks to the vaccine rollout). In particular, sectors such as energy and financials might be more attractive than tech right now.
Next up: what does this mean for Spaceship?
We believe in the value of long-term investing. We won’t make any fundamental changes to what we’re doing; as we said, we know markets go up and down at times.
When it comes to our Spaceship Universe Portfolio, we’ll continue to assess the stocks in that portfolio against our Where the World is Going criteria. That is, we’ll consider whether we believe they have competitive advantages and products or services that are becoming more relevant over time. If we feel a company no longer has long-term value, it will be removed from the portfolio (and we’ll let you know).
This is largely the same for our Spaceship Earth Portfolio, although we will also assess the stocks in that portfolio against our sustainable investing criteria.
For our Spaceship Origin Portfolio, things are a little different.
If a company moves in or out of this portfolio, it will be because its market capitalisation has changed, not because we have made the decision to buy or sell it.
That’s us. Now, what does this readjustment mean for you?
When it comes to investing, it can pay to hang in there.
We have a minimum suggested timeframe of seven years for anyone holding an investment in a Spaceship Voyager portfolio because, generally, when equity investments are held for longer periods they tend to exhibit lower volatility than those held for shorter periods. (Although, naturally, past performance is not a reliable indicator of future performance.)
We also know that can be easier said than done when the market drops, but long-term investors tend to live by the “time in the market, not timing the market” philosophy for good reason — because by trying to pull out of the market on a bad day, you could also end up missing out on a good day.
J.P. Morgan Asset Management’s 2020 Retirement Guide has some insight into this.
Over the 20-year period from 3 January 2000 to 31 December 2019, if you missed the ten best days in the stock market, your overall return was cut in half!
To be more specific, if you put $10,000 into the S&P 500 Index, and remained fully invested over the entire period, you’d have ended up with $32,421. If you had missed the ten best days, you’d have ended up with $16,180.
All this to say, it can be worthwhile to stick it out. Some people even use market drops to put in more money and potentially supercharge their investments.
Having said all that, you should absolutely make your own decision, a decision that suits your personal financial situation. Again, past performance is not a reliable indicator of future performance.
