Beck BodeMarket volatility makes headlines, but at Beck Bode, we've always taken the deliberately different path. In a recent episode of the No BondsCast, Beck Bode's managing partners Ben Beck and Jim Bode were joined by Vincent Savio, Director of Client Advisory, to discuss market volatility, investor behavior, and the importance of having a long-term investment strategy.
"The increase, the long-term increase of the markets as a whole is relentless," Ben explains. "We've got over a hundred years of data showing the markets have chugged along in a really healthy average rate of return over that time."
With over a decade at Beck Bode, Vinny brings valuable perspective on how our unique all-equity approach has weathered countless market storms. One truth remains constant: successful investors focus on time in the market, not timing the market. This becomes especially crucial during periods like the recent tariff-driven volatility – just another chapter in the market's long history of climbing the wall of worry.
Watch the Full Episode
Key Takeaways from the Episode
- Corrections are normal: Market drops of 10% happen every 14-15 months on average. That $100,000 decline in your $1M portfolio? It's a temporary setback, not a permanent loss.
- Strategy stays constant, holdings evolve: Our investment approach doesn't change during volatility. What changes are the individual companies we own, based on rigorous research, not market headlines.
- Timing markets is a fool's game: In 2018, the US-China trade war caused months of anxiety and a 6% yearly decline. Investors who stayed the course saw 30% gains by the end of 2019.
- Cash reserves prevent forced decisions: Having money set aside for near-term expenses means never having to sell at market bottoms. This creates both financial and emotional resilience.
- Patience is the ultimate edge: "The most important piece is honestly patience" – it's the secret ingredient that separates successful investors from the crowd.
Q&A with Vincent Savio on Market Volatility
Q: How common are market corrections, and what exactly defines a correction?
Vincent Savio: "A correction by definition is a 10% drop from the market's highest peak at that time. From a frequency standpoint, when you look over the years, it happens on average every 14 or 15 months.
If you're listening right now and you have a million dollars in your account, a very normal correction means that your account will probably drop at least 10% temporarily. That's going to drift below $900,000 – a $100,000 decline. Again, this is not going to last historically very long before moving back up, but it's important to quantify these things in dollar terms."
Ben Beck adds: "We often hear the four words 'this time is different.' Unfortunately, those are usually the most expensive words in investing. History has consistently proven otherwise."
Q: How should investors approach market turbulence caused by current events like tariff discussions?
Vincent Savio: "I find it tremendously frustrating at times because we have such a short memory for all the things that have happened in the past. Looking at a chart of market events over just the past 30 years, you'll see over 37 significant events that triggered market reactions.
For example, the 2018 US-China trade war had similar characteristics to what we're seeing today. There were tariffs imposed back and forth, the market reacted negatively and had a significant pullback, ending the year down about 6%. CNBC headlined it as 'the worst year of the market since the 2008 financial collapse' and 'the single biggest point drop day ever.'
From the top to the bottom lasted approximately 65 trading days. Then from the trough back to the point of the old peak was an additional 75 trading days. We're talking about months of anxiety. Yet by the end of 2019, the market was up approximately 30%. Had you invested on the first day of 2018 with a million dollars, not panicked, sat through everything, and remained invested in the equity market, your return would have been around 68.9% by today – meaning your million dollars would now be worth approximately $1.7 million."
Jim Bode adds: "Since Ben and I started working together in 2009, there have been 23 events or crises on this chart. And I'll tell you, during those 23 events, our investment strategy hasn't changed. The strategy stays the same – what we've been doing stays the same. The individual holdings will adjust based on what's happening in the world around us."
Q: How does Beck Bode's approach to financial planning help clients navigate market volatility?
Vincent Savio: "First, you should have a goal of what the money is being utilized for. Once you have your goal established, you're able to set a plan in place. Once you build out a plan, you now have a target of what you need to get to, what you need to achieve, and what you can expect along the way. Then you implement a strategy on how to execute that plan. And it's all going to tie back to your original goals.
The most important piece is honestly patience – patience by us as an advisory team and by the investor who has to sit through watching their money go up and down."
Q: For retirees who are concerned about market drops affecting their income, what strategies do you recommend?
Vincent Savio: "Having an amount of cash set aside covering your specific living needs is crucial. The idea is putting that in a money market type account, making sure you have access to the principle. So when the market does start to draw down, which is inevitable, we aren't selling your positions at a loss. Instead, we're enduring the volatility during that time, letting the strategy work the way it needs to.
When the market recovers, we're in a good position where we didn't settle those losses. During market downturns, we can take money out of that cash bucket to supplement your needs. When the market recovers, we'll start dipping back into the stocks that are producing gains and replenish that cash bucket."
Q: What's your perspective on market timing versus long-term investing?
Vincent Savio: "Is it a good time to invest? Well, none of us know if it's the perfect day, but if you're sitting on money on the sidelines and waiting, ask yourself: What is it for? Do I have a fallback account in the short term? Are these proceeds going to be used for something that requires short-term liquidity?
If you're looking three, five-plus years out, as history has shown us, it is a good time to invest. It's a good time to establish a plan. It's a good time to execute on a strategy."
Ben Beck: "When it comes to investing, trying to predict what the economy is going to do in the short term or trying to time your entry or exit – that's not the game. Our policy is to invest throughout any and all of these market declines that we see. The research is looking forward to giving us information about where the profits of these companies are expected to rise or fall. That's the name of the game for us."
Q: How does Beck Bode maintain consistency during market turbulence?
Vincent Savio: "Our approach starts with defining your goals, followed by building a plan, implementing a strategy, and maintaining patience. When market volatility occurs, we don't change our process or investment philosophy. What changes are the individual holdings based on our research about future earnings prospects.
That chart we referenced shows 37 major market events over 30 years. Had you invested at the beginning of that period and maintained discipline through all those crises, your results would have been remarkable. For example, had you invested $1 million at the start of 2018, gone through the trade war volatility, and stayed invested through today, your investment would be worth approximately $1.7 million now."
Jim Bode: "We do get asked all the time, 'Okay, what are you guys going to do differently this time?' or 'What has to change?' The reality is nothing has to change. The process is proven to work through all the ups and downs and the volatility through any market. What does change are the individual holdings that we have for our clients. Based on the research that we have, we're going to review every six weeks on the growth side and see what's happening in the world. We're going to look at future earnings, and when those future earnings change, we're going to change with it and put different holdings in our client's portfolio. So the strategy stays the same – what we've been doing stays the same. The individual holdings will adjust based on what's happening in the world around us."
Focus on Time, Not Timing: Contact Us
If you're tired of the Wall Street playbook that has you watching every market twist and turn, consider a different approach. As Vincent emphasized in this episode, corrections happen every 14-15 months, but it's patience and discipline that lead to successful long-term investing.
Ready to put time on your side? We're here to help.