January 2019 Commentary

Life’s a dance you learn as you go

-John Michael Montgomery

John Michael Montgomery is right – we learn as we go. That is the joy in life, we will never master it all, but we will continue to learn and grow. In the well-delivered context of his song, he doesn’t add that sometimes we must relearn things that we already know to be true. An interesting aspect of investing is that many fundamental facts often prevail in the long-run. They can be forgotten at times, but something usually happens to remind us of them. One of those facts that you may have learned in the past is to not time the market.

Volatility is back so please don’t try timing the market. This can be scary when we see U.S. large-cap equities down 3% one day and up 4% the next. At times like this, it is natural to want to attempt to understand what is happening and make the “perfect” move for your portfolio. There are many names for it, but in the end, it is an attempt to time the market. This is a common thing for individuals and even finance professionals to try. We know it isn’t right but rarely know why. In a white paper called “Time in the market, not timing the market, is what builds wealth” by Stephen Rogers of Investors Group, he discusses the effect of trying to time S&P 500® which is just one of many asset classes in the overall market.  The most convincing numbers are represented in the figure below.

The figure above shows the annualized returns of the S&P 500® for 20 years from 1997 to the end of December 2016. You can see that the S&P 500® returned 7.68% annually for those 20 years. If you were to exclude the 20 best days in that 20-year time, which has over 5,000 trading days, your annualized return drops from 7.68% to 1.57%. The chart below helps put into perspective the impact on a $200,000 portfolio from January 1, 1997, to December 31, 2016. If you never got out of the S&P 500®, you would have $600,089 at the end of 20 years. If you missed the 20 best days which means you only missed about 0.40% of the trading days, your portfolio would be worth about $274,500. This means those 20 days affected the portfolio by $325,589.


Of course, your first thought would be “What are the odds of only missing the 20 best days?” I understand where you are coming from, but the purpose is to show you that in the end, it is a few days a year that have the biggest impact on your portfolio. Finance can be boring at times, and people want to deter from fundamental knowledge when volatility is low, and the market is rising; however, there is a reason there are fundamental facts. Let life be a dance and let us learn as we go but let us quit needing to relearn these fundamental facts about investing. Don’t get distracted by unique success stories from the finance media, our neighbors, and our friends. Instead let’s spend some “Time in the market, not timing the market.”





Past performance is no guarantee of future returns.  Performance discussed represents total returns that include income, realized and unrealized gains and losses. Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on the information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees, and expenses.

Information provided herein reflects Frontier’s views as of the date of this newsletter and can change at any time without notice.  Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external sources should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within.

Exclusive reliance on the information herein is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.  References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions, and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell any securities, commodities, treasuries or financial instruments of any kind.  This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, investment or tax advice.   

It is generally not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third-party investable instruments (if any) based on that index.

S&P 500® Represents US large company stocks. It is a market-value-weighted index of 500 stocks that are traded on the NYSE, AMEX, and NASDAQ

Rogers, Stephen (2017) Time in the market, not timing the market, is what builds wealth. Investors Group Inc.                                                                                                                                                                                      063021CST063022.

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