Midlothian financial adviser discusses market volatility: ‘Stay the course’

RICHMOND, Va. — If you’re saving for retirement and worried about the tough turn the stock market has taken this year, Sandy Wiggins of ACG Wealth Management in Midlothian has some advice.

The S&P 500 stock index was down almost 24% through the end of September, and bonds – which are generally seen as a safer alternative to stocks – also suffered badly. The main bond index, the Bloomberg US Aggregate, lost 14.6% through September.

“These are scary times for investors, especially those who are retired or plan to be in the next few years,” Wiggins said. “However, the key to successful long-term investing is to keep fear out of your decision-making in tough times like this. The psychology of investors is such that greed in good times and fear in bad times lead to overreactions and bad decisions.

Wiggins said there were several things to keep in mind.

“First, realize that timing the market is a losing strategy,” Wiggins said. “By market timing, we mean the act of getting out of stocks to cash in or something else conservative in hopes of coming back when things get better. The best demonstration of the folly of timing the market is to examine the impact on its performance of staying invested rather than missing a number of the best performance days.

Wiggins showed a chart that revealed over the 15 years from the start of 2007 to the end of 2021, if an investor had simply bought an S&P 500 index fund and never sold it during that time, their annualized return would have was 10.66%.

But he pointed out that if you stayed out for a while because of fear, you missed out on better performance.

“In contrast, missing the top 10 days in that 15-year period more than halved their return, to 5.05%,” Wiggins said. “Missing the best 20 days brought it to just 1.59% per year and missing the best 30 days led to a negative return of -1.18%.”

Wiggins also said the big problem with trying to time the market, entering and exiting periodically, is that the best days tend to cluster around the worst, and more often than not, they come after them.

In 2022 alone, through September, five of the top 10 days for the S&P 500 have occurred within a week of one of the worst 10 days.

So have an investment plan and let it roll, Wiggins said.

Geraldine L. Melton