by Samantha Lamas
The pandemic forced us all to form new habits in every aspect of our lives, including how we spend our money. Instead of grabbing lunch with friends or planning our next vacation, many of us stayed home and experimented with sourdough bread recipes. Environmental restrictions, while keeping us safe, also inadvertently prevented many of us from excess spending.
As many locations begin easing restrictions, many predict a boom in consumer spending. For those who are enjoying their healthy savings accounts, there’s a downside to partaking in that boom.
To help your clients stick to their saving goals, guiding them through a reflection process may be key to prolonging the good habits they’ve adopted.
Creating a new habit depends on a few factors: the difficulty of the desired behaviour, the context or environment of the decision, and the incentive associated with the behaviour. Many times, people struggle to create a new habit because they disregard the importance of their environment.
For example, if your goal is to lose weight, one of the most beneficial steps you can take is to get rid of any temptations in your kitchen. During the pandemic, restrictions acted as that environmental fix, where individuals were shielded from the temptations of overspending in in-person settings. However, this strong-armed fix may soon be coming to an end.
For clients who would like to continue building up their savings accounts, now is the time to help them prepare for the loosening of restrictions and the impact that may have on their financial decisions.
Start off by helping clients identify the good behaviours they’ve adopted over the past year.
Ask clients to write down the good habits they would like to stick to in the future and why. What financial goal will they get closer to by sticking to this habit? The practice of writing out a behaviour and reconnecting it to a personal financial goal can act as a precommitment device–a “contract” between your clients and their future selves that they can look back on when the habit begins to falter.
It’s important to acknowledge that our current environment has helped us stick to our new spending and saving habits. As social distancing restrictions begin to loosen, we must brace ourselves for the times when our new habits may be tested. For example, socializing may start to become more common, along with the expenses that come with it.
Under these circumstances, it may be difficult for clients to keep certain habits, like spending less on eating out or entertainment. To prepare for this new environment, help your clients identify the needs they are trying to satisfy with certain behaviours and come up with a new strategy to meet those needs. For example, spending money on expensive dinners may have more to do with the need for socializing versus the meal itself. Help your clients find a budget-friendly strategy for meeting this need, such as inviting friends over for a home-cooked meal instead.
No matter how much we prepare, our newfound habits may still falter under pressure. As a solution, work with your client to create barriers to action. For example, implementing a three-day wait rule, where your client agrees to wait for three days before acting on a decision. For everyday spending decisions, this can help prevent your client from making spontaneous purchases that they may regret later.
Many of us are looking forward to getting back to “real life,” but there may be a few habits we hope to hold on to, such as setting aside money every month or saving up for big purchases. This past year has upended our lives in so many ways, but, for those of us who can, it’s important to look back and see what has changed for the better and incorporate that as we forge ahead.
Baz Gardner’s advice in Growing your practice: How to set yourself up for success, the second session of Morningstar’s 2020 Practice Optimisation Forum, struck a chord with time-pressed advisers. The three key strategies: value proposition, aligning value to fees charged, and building a steady pipeline of high-quality referrals delivered some immediately implementable opportunities for advisers to question and build on their day-to-day practises.
In a poll run at the beginning of the session – What is the biggest internal hurdle you face in growing your business? – advisers were evenly split across three answers:
Whilst not surprising answers to Gardner, he was keen to explain how interconnected these issues are. Working through these issues are fundamental building blocks to driving growth in any advice practice.
Value proposition: never done and continuously improving
A value proposition doesn’t stand alone and Gardner suggests it’s the most important thing to get right.
“Your value proposition is never done. It should continue to get better. Once a firm thinks they’ve got it right, is when we see stagnation set it.” It’s an opportunity to keep improving and perfecting how you articulate the value you add to your clients.
Some of the simplest changes can drastically alter the profitability of a business; for example bringing to the forefront the ‘implied value’ of what you provide clients. As advisers, it’s crucial to have a general value proposition when you begin your engagement, becoming an increasingly more specific value proposition as a prospect becomes a client. Key to this is exploring their objectives, needs and wants, to really get to know what they hope to achieve. Gardner noted that this element of relationship-building hinges on specific, emotionally resonant language, and appeals to the truly human needs of a client beyond returns.
Part of developing these targeted value propositions is accountability, and the partnership nature of the advice relationship. Being not just a sounding board but a source of objectivity is foundational to the success of an adviser-client relationship – which includes setting and managing transparent expectations from the start. “We’re professional nags and we’re going to protect you from bad decisions – we expect you to take it seriously,” Gardner said. As a result, he emphasises the importance of establishing what kind of partnership style your prospective clients expect from their adviser – a key step in engagement sequencing that sets the tone for the rest of the relationship.
Pricing models: every adviser I’ve met underestimates the value they provide, it’s just a case of by how much
What’s a good pricing model? Gardner suggests “one that charges enough, with the right people.” And one that allows for the charging of additional value with additional commercial exchange. This means a profitable, sustainable practice with sufficient price tension, therefore allowing adding value where possible. What a sustainable pricing model shouldn’t do is surprise a client.
If you were having a pool built in your garden and the contractors hit bedrock, they wouldn’t carry on regardless. There would be a consultation, an option to continue or not and a clear disclosure of the additional cost. Complexities and additional work as part of the advice process is no different. That’s why having a clear pricing structure and fully briefing clients before they agree to a service not only allows for a clear articulation of value and services, but establishes and maintains trust as well – leading to longer, richer client relationships.
Gardner suggested a base retainer fee to be set and charged annually, particularly in light of the Hayne Royal Commission. Importantly, he also noted that advisers should at charging additional fees where they deliver additional value: ensuring clear benefits for both parties. Again, he noted that explicit clarification of what fees are charged for is integral to ensuring happy clients.
Referral pipeline: your business – an expression of you
Finally, Gardner spoke about how to grow a client base and finding the right clients. Rather than simply looking for potential paying clients, he looks at potential clients whose goals and values are aligned to how he delivers advice – therefore enabling you to serve more clients, better. “Meaning is one of the five things I value most in my life,” he said, “so my relationships need to have meaning.” In creating these deep relationships, word-of-mouth referrals from highly engaged clients can become a key source of organic growth – in Gardner’s estimation, 2-3%.
Baz suggested adopting a ‘go-maybe-no’ traffic lights system to consistently ensure you’re focusing on clients most likely to result in successful, fulfilling, long-term relationships.
And if you’re getting all these moving parts right, here are some final words from Gardner: “the money that they pay you will never come anywhere near close to the value you’re creating, and the impact on their lives.”
All Investing is Active Investing
The move to passive investing has been a powerful trend, but to date has focused on security selection. In this context, passive refers to the replication of a market capitalisation-weighted index, while active may describe everything else. The same principle may apply to asset allocation, with passive classically defined as holding the entire investable market in proportion to the abundance of each part.
Clearly, few, if any, investors proportionally own every investable asset. Therefore, almost every investor is active on some level. Furthermore, replicating an equity index such as the S&P 500 is therefore not strictly “passive” since trading is required to match the constituents of the index. In this sense, the connection between buy and hold investing and passive investing can be misleading.
When we look at how assets are invested through more accurate definitions, we believe the share of actively managed assets hasn’t declined, as much as shifted, from security-selection to asset allocation.
That is, those buying exchange-traded funds (ETFs) aren’t buying them for keeps. They’re using them to express an active investment decision (sometimes to meet a client need) and often trading them frequently, invalidating the term “passive.”
On balance, this shift in active management increases the opportunity to outperform, we believe, for investment managers who are able to take broader views on asset classes, sectors, industries, and other characteristics. In turn, this may increase the opportunity for investors who are patient.
Shorter Time Horizons Hurt Investors
Time horizon turns out to be critical for taking advantage of investment opportunities for truly active management and receiving the benefits of compound interest—benefits that are hard to overestimate. Yet, this observation contrasts with the fact that average holding periods continue to fall. Holding periods have arguably been shortened by the rise of passive management, which appears to be a contradiction given passive funds’ low turnover rates.
If index-tracking holdings aren’t frequently buying and selling stocks, how could they contribute to shortening horizons? Because they themselves are being bought and sold. With the rise of lower-cost investment vehicles that can be traded like individual stocks, ETF volumes have risen to meaningful proportions of the market activity relative to their size. Still, it has been estimated that only about 10% of ETF volumes leads directly to the creation/redemption of shares.
Despite this, it does appear that this turnover and activity impacts the underlying securities, with higher volatility and turnover for stocks included within ETFs amplified by arbitrage activity—often impacting sectors, countries, industries, styles, or themes.
This presents an opportunity, through active asset allocation of sectors, industries, and countries across equity markets, and for bottom-up investors that can take more active risk by including focused exposure to these areas. While the game may be getting harder in the more narrowly defined subsectors, it may be an opening for those with a long time horizon and a high active share.
By Definition, You Must Do Something Different to Outperform
According to Sir John Templeton, one of the great investors of the 20th century, it’s impossible to produce superior performance unless you do something different from the majority.
Academics call this “active share,” which is loosely defined as how different an investment strategy is from its benchmark. High active share should not be interpreted as having a higher likelihood of outperformance on its own. Like all things, one should be cautious in drawing conclusions from a single metric. On this point, author and academic Martijn Cremers identified that funds with high active share and low turnover tended to do better on average. This makes sense to us.
In our opinion, while certain strategies with lower active share and higher turnover can and do outperform, for fundamental investors time horizon seems to be the road less travelled. This concept of patient capital has been described as time horizon arbitrage and is tied to the idea of limits to arbitrage. In other words, patient investors may reap rewards—these rewards are available to any investor, but in practice go to only those who do what it takes.
Arbitrage Comes in Different Forms, Including Time Horizon
Arbitrage typically refers to different prices set for the same asset, a condition that generally requires not enough market participants seeing the big picture. The astute investor can buy at the lower price and sell at the higher one, keeping the difference.
Once, arbitrage involved buying something (gold, for example) at a lower price in one port, and sailing it to another port to sell at a higher price. With a large enough spread (and trustworthy enough sailors), anyone could take advantage of the price difference, but of course not everyone did.
Time horizon arbitrage is the idea that many investors are so focused on the short term, with lots of competition for investment results, that they don’t see the big picture, in this case the value of the investment for a long-term owner. Whether due to incentives or to psychology or career risk, there’s a reluctance to extend one’s horizon. With all the focus on winning over the short-term, this reduces the competition for information that is only relevant over the long term.
While there are no doubt opportunities over short horizons for talented investors and traders, as the time horizon extends, competition appears to decline. The desire or need for quick results is the siren song for most investors. This presents an arbitrage opportunity for those willing to tie themselves to the mast and wait patiently for potential returns.
Bringing It All Together
While headlines decry the decline of active management, we may be seeing a change of active management from purely security selection to active asset allocation. This utilises portfolios of stocks, principally ETFs, rather than the underlying stocks themselves. The rise of passive management may imply less activity and longer holding periods, however the opposite may be occurring.
With the rise of active asset allocation through ETF trading, we see an opportunity for asset managers willing to be different, taking a long-term view. As the security selection asset manager universe shortens their time horizon and increase their activities, the opportunities may well be in doing the opposite—fishing where the fishermen aren’t. Reinforcing one of the few durable investment advantages—a long-term investment horizon.
We think this changing nature of active management is therefore an opportunity and an advantage for us at Morningstar Investment Management. Our investment process is designed to opportunistically buy assets and patiently hold them until they appreciate. At times this means that we are well out of step with markets as we wait for prices to return to their long-term fair values, but we believe that we will significantly help investors meet their goals in the long run.
Of course, we can’t do this without their help. Changing strategies midstream can destroy value for investors because it often means selling low and buying high—something commonly referred to as “chasing returns.”
Financial advisers can help clients stay the course by reminding them of the big picture and keeping their focus on the long term.
The market volatility in the second half of 2020 can make even the most seasoned of investors cautious.
Hesitation to trade during a downturn, however, creates an interesting dilemma: Investors are afraid to lose money, yet downturns can provide great opportunities to buy stocks at a discount. So, how can advisers help their clients calmly and thoughtfully evaluate when to buy? We believe that proper framing–how advisers describe a situation–can play a beneficial role.
3 approaches to calming investors’ market anxiety
In our experiment, we sought to understand how market downturns can affect investors’ decision-making. Specifically, we were interested in whether particular pieces of advice from a financial adviser could differently affect investors’ engagement with the market during increased volatility.
The experiment included an online sample of 880 Americans (representative by age, gender, and ethnicity), and took place in late May 2020–as markets began to calm.
The experiment’s design was simple. To ensure that our participants were aware of the market volatility, we had them read about the downturn of global stock markets with the onset of the novel coronavirus pandemic. They imagined receiving advice from their financial advisor on how to best manage their assets during market volatility in one of three forms:
Participants then decided on changes they’d make to their portfolios: either sell their equity investments, invest more in the stock market, or make no changes. We also included the option “make no changes due to having no equity investments” to omit non-investors (removing 105 participants). Only 48 participants decided to sell their investments (a sample size too small for meaningful comparisons), so we grouped them with those who decided to make no changes in order to form a “did not buy” group.
This study turned up three main findings:
These findings suggest that during a downturn it may be more beneficial to help clients reframe their thinking so they feel positive about investing, rather than to simply encourage them to purchase.
Multiple paths through market anxiety
When the markets grow increasingly temperamental, it’s natural for investors to get nervous. There are, however, good reasons to weather the storm.
Our research shows that clients can benefit from market swings if they see downturns as a blessing, not as a curse. For anxious clients who have the resources to invest but remain hesitant, encouraging them to see increased volatility as an opportunity to earn a profit rather than as a reason to run can be a successful growth strategy.
This article includes research from Morningstar behavioural researcher Sarwari Das.
Understanding and positioning the value of advice has long been a point of tension for advisers – arguably even more so as the financial landscape changes. Whether those changes be related to a changing client demographic, more regulatory scrutiny, or dare we say it – a surprise pandemic. Morningstar’s Deborah Graham lead this discussion in Building the Modern Advice Practice of the Future, the final session of the recent Practice Optimisation Forum.
Graham was joined by Recep III Peker (Investment Trends), Grant Chapman (Fintech Financial Services) and Phil Anderson (Association of Financial Advisers). Attendees were welcomed to the digital session with a poll that would then dictate the topic of the day: a choice between ‘making advice affordable – is there a role for scaled advice?’ and ‘the value of the technology stack’. Scaled advice had the edge with 59% of the votes, sparking a thoughtful discussion among the panellists.
Aligning value to appetite: Finding opportunities in scaled advice
Recep III Peker cited a July 2020 survey finding that people actively seeking advice said, on average, they’d expect to pay $360 for financial advice. Taking rent, overheads and other costs of running a business in account, Peker gave a ballpark figure for what advice generally costs – closer to $3000-$4000, therefore revealing significant dissonance between the perception and actuality of pricing. He suggests that scaled advice is the gateway to building a broader, comprehensive advice relationship – providing the opportunity to educate clients on the value of both advice and the advice pricing models.
“If you get personal advice, it’s like jumping into marriage straight away. With scaled advice, it’s more like dating. There are three times as many people who want to start with scaled advice, but 93% of these people are happy to get comprehensive advice down the track. Essentially, scaled advice can serve as a strong hook when it comes to addressing the affordability of advice.”
Phil Anderson agreed, but noted industry challenges that advisers may face as they seek to incorporate scaled advice in their service offerings. “Scaled advice is going to be critical to keep advice affordable for everyday Australians. Research says the unadvised aren’t willing to pay, but existing clients are paying substantial amounts of money and are getting great value out of that… we’re in a difficult position because we see a lot of opportunity with scaled advice but we need more regulatory certainty. And we need to have the opportunity for advisers to improve their processes and push forward to really rationalise the process, to add value at every stage for the client so they’ll want to come back.”
In discussing value, having a clear picture of your customer or intended audience can shape your practice. “What is your target client segment?” Grant Chapman asked. “If you’re dealing with Generation X or a younger cohort, they might be used to doing things online and getting things quite cost-effectively, you’d need an offer that appeals to them. Providing a scaled advice solution, and particularly using technology – I can’t emphasise enough how much technology needs to be integrated for efficiencies and delivery. You may use scaled advice to get initial business with a younger group, and that becomes a journey as their life evolves.”
Positioning the cost of advice
“It’s a real tension for advisers,” said Chapman. “How do we actually deliver what the client needs, whether that’s scaled advice, or where every area of advice is comprehensively addressed with a lot of cost and time involved?… We have to re-educate our clients and deliver the information to them in a way that they understand the value that’s being provided to them. I think when clients actually do see that, and go through the process of understanding, they’re more willing to pay for that advice.”
Similarly, the efficiency theme doesn’t just apply to the scaled advice realm – nor is it just about creating day-to-day efficiencies in your practice. “Right now for financial planners, the true opportunity to make money, is from your ability to retain a larger client book. So anything that makes you more efficient is really powerful. If you’re sitting behind your computer picking stocks every day, that’s time you didn’t invest in doing the client update and showing them value to invest another year,” said Peker.
How do clients want to be engaged?
Tailored communication with clients may not be reinventing the wheel, but research shows that this foundational piece remains hugely important to clients across the board. “Satisfaction with financial planners is at the lowest level we’ve observed in ten years,” said Peker. “And this isn’t because financial planners aren’t managing their clients’ investments well. If you ask clients to rate their financial planner on investment expertise and investment selection, it’s actually at a near-time high, because for a lot of people their adviser told them to stay in the market. However, what’s dragging the satisfaction score down is the piece around how frequently I get contacted, ability to explain investment concepts and so on.” Delivering financial education, engaging content and therefore creating a two-way relationship with clients has become a cornerstone of the modern advice practice.
Social media, video and intuitive online portals have been everywhere in 2020, and the advice sector is not immune to these trends. With different mediums appealing to different audiences, the panellists also spoke to how these methods can best convey an adviser’s well-thought-out messaging.
Financial planning software and emerging fintechs also rated a mention in the client engagement space: “you can really personalise the experience and make the client feel in control of the process… However, we need regulatory certainty so advisers know how to incorporate this into their processes,” said Anderson.
It’s apparent that though the methods may change, proactive engagement remains a reliable tactic that endures through industry changes. And in doing so, advisers are better positioned to plant the seeds for long-running client relationships.
Dan Kemp is the Chief Investment Officer for Morningstar Investment Management in the Europe, Middle East, and Africa region. Below is an excerpt of a presentation he gave on the economic impacts and outlooks in a Covid-19 world.
It goes without saying that we live in extraordinary times. We’ve never before had a deliberate stop on the economy in peacetime. And it’s not surprising that we witnessed a very sharp fall in asset prices in February and March 2020. Living through these periods can be unsettling, but I think we need to remember that market crashes are a feature and not a bug of investing. Crashes reset valuations and provide the opportunity for investors to improve their portfolios–and particularly to improve the expected returns of those portfolios long into the future.
To use an agricultural analogy, we can think of crashes as providing the fertile soil into which we sow the seeds of future returns. Unfortunately, unlike the turning of the seasons, the precise timing of crashes is unpredictable. You don’t know when they’re going to occur. Moreover, you can only sow seeds into ground that is cleared of the last harvest. Investors who left the previous crop in the ground too long hoping for a bigger harvest were poorly prepared for a crash and face the problem of trying to decide what to plant and what to harvest at the same time.
Now, we at Morningstar Investment Management, like anyone else, don’t know when a crash is coming, but the investment team spends a lot of time thinking about whether the current environment is favourable for investors and whether our focus should be on planting or harvesting. And as prices of some equity markets became very stretched over the past couple of years, we’ve generally taken a little bit less risk in portfolios, so we were reasonably well prepared for what happened in February and March.
Providing you’re not caught with your harvest rotting in the fields, investing during a crash is pretty straightforward. You simply buy more as prices fall and the margin of safety for future returns looks better and better. The questions become: what you buy, how much you buy, and how quickly you buy. We responded to those falls in February and March by rebalancing portfolios. That’s the first and most efficient step. Then, toward the end of that March period, we added more equity risk.
The current situation is now much more difficult. The opportunities we saw a month ago have declined. U.S. equities in particular have risen sharply, and simply adding more risk is less attractive than it was. Now we are much more focused as an investment team on finding the best opportunities. We’re especially interested right now in sectors that have been hit the hardest during the downturn–for example, global energy and high-yield bonds. We’ve been adding those positions to the portfolios.
We’re also seeing opportunities in markets that fell sharply but haven’t really participated in the recovery. U.K. equities are a good example of that, and some emerging-market bonds have become relatively more attractive as well. Of course, all these decisions are being underpinned by the deep fundamental research that’s the hallmark of our investment management team.
Another challenge faced by investors in volatile times is that they tend to look at the path behind them and use that as a guide to the future in front them. We can think of this a little bit like driving a car just using the rearview mirror or plowing a field (to stick with the agricultural analogy) just looking behind you. We know that leads to poor outcomes. You see that when people talk about the fact that we are past the worst, or that asset prices have risen too quickly–that indicates the path behind them is influencing the way ahead. The truth is that, frankly, we don’t know what the near-term future holds. So, our portfolios have to be prepared for a range of possible outcomes. We also have to prepare our clients, as we can only empower their success if they stay invested.
I’ve learned some things that may help you as you think about long-term investing, or for advisors who are asked questions by others. The first is that we have to acknowledge people’s concerns. We need to listen to them before they’ll listen to us. There’s no point just brushing past their concerns. We need to take those concerns seriously. Second, we need to understand that different people need different responses. Some clients need reassurance. Others will need evidence or data to help them make their own decisions. Some groups will need to be challenged out of wrong ideas or bad ways of thinking. Third, we need to focus on price/fair value and not on those past returns. By looking only at near-term returns, we can get the completely wrong idea. If you want to see how this works, I’d recommend going to the home page of Morningstar Direct and looking at the difference in the way that you feel when you look at year-to-date returns, which are a sea of red, versus the valuation lens, which shows a much more gentle blue (meaning that many assets are currently undervalued).
And then fourth–and most importantly–we need to focus on goals. The question is not how much is in your portfolio, but whether you’re on track to meet your goals. An investor who has clear goals and a portfolio that’s matched to those goals is likely to be more empowered and therefore successful.
Kyle Cox, Investment Analyst, EMEA
Dan Kemp, Chief Investment Officer, EMEA
With the Trump administration starting a purported trade war with China on July 5, questions have
grown into fears over how tariffs may affect the global economy. However, we offer a more nuanced
response to the question, posed in the title, which is on many investors’ minds today: We do think U.S.
stocks are overpriced now and believe selling overpriced assets is a good discipline. But selling should
not be driven by fears, macro events, and the like. In fact, over the long run, investors usually perform
better when they ignore these market tremors and stay focused on their financial goals.
A Nasty Trade War Is Possible, But How Likely?
Investors seem spooked by the recently announced tariffs and the possibility that all of this may lead to
an ugly trade war. The subject has clearly grabbed attention and headlines. As illustrated in the exhibit
below, Google searches in the U.S. for “trade war” and “tariffs” spiked in recent months as the Trump
administration began an effort to renegotiate terms with its trade partners, starting with tariffs on steel
and aluminum announced in March. That move was aimed at China, but also impacted many other
Unsurprisingly, China prepared countermeasures by proposing tariffs on imports of American soybeans,
sending commodity prices tumbling. Mexico and Canada faced challenges as the U.S. administration
sought to renegotiate the North American Free Trade Agreement. European countries confronted the
U.S. over tariff threats on autos. Retaliatory measures from all sides raised the probability of an
extended conflict that may hamper global economic growth.
We don’t believe that the announced tariffs present a major threat to global economies. The proposed
tariffs are significant and would affect 23% of U.S. imports, primarily hitting auto imports. However, we
believe the U.S. economy, in particular, is large enough and domestically oriented enough to not feel too
much pain from current measures.
Of course, trade tensions and tariffs could become more severe and, at worst, tip the global economy
toward a recession. But getting too focused on a worst-case scenario ignores the possibility that
tensions cool, compromise is reached, and investors go back to focusing on strong earnings. It wasn’t
too long ago that presumed nuclear conflict on the Korean peninsula sent tremors through global
markets, but that seems to have been laid to rest for now.
Should Investors React?
The short answer: no. We focus on long-term valuations—the true and durable value of an asset class,
rather than its market price. Having a long-term perspective makes the next turn in the trade spat less
concerning to us. Instead, we ask, “How might this affect fundamentals over the next several years?”
Investors who trade on emotion and market reactions are more likely to sell when markets are low and
buy when they’re high. We seek to do the opposite, in part by sticking to our principled approach to
investing, which is designed to keep us rational in a sometimes irrational world.
Because we’re defensive now, we are prepared to be buyers if this or other concerns provide an
attractive buying opportunity. That point isn’t here yet. The effects of trade-war fears on U.S. stocks
have been minimal to date, with the post-crisis rally still up 15.3% on average for each of the last eight
This long bull run has made U.S. stocks pricey, we believe, so we’re expecting below-average returns
from U.S. stocks over the next five to 10 years. But that does not mean we would ever sell stocks—or
any asset—based solely on newspaper headlines, the macro view, or fears. In fact, if anything, fearbased
price declines alert us to possible buying opportunities.
What Should Investors Do About Macro Events?
Perhaps the easiest thing to do is to do nothing. Ignore the headlines and stay focused on the long term.
But really the best investment advice is saving advice: develop a plan to reach your financial goals, then
stick to it. When you get an itch to do something different, try saving more—that’s probably the best
move to improve the chances of an investor reaching their goals.