A Snapshot of Beta Wealth’s Investor Resilience During the Downturn

Jodi Vleck, CFP®

Beta Wealth Group, Founder and CEO

The volatility of the financial markets during the first half of 2020, punctuated by the most sudden, steep decline in U.S. market history, tested the mettle of most investors. Despite the gut-wrenching drop of nearly 34% in the S&P 500 Index in just over a month, Beta Wealth investors held firm, sticking with their plans and. This discipline ultimately results in better outcomes over the long term.

The Courage to Stay the Course

We've long professed that short-term market movements—whether up or down—should not dictate one's investment strategy. The data shows that Beta Wealth investors agree, and stayed invested through the recent volatility. A willingness to weather sudden market drops is an important part of long-term investing. Although it is a natural instinct to seek to preserve capital when the market drops precipitously, too often investors remain on the sidelines and miss the inevitable recovery.

Back in March, we reminded investors to stay the course. A balanced, diversified portfolio is built to weather tough markets. The majority of investors (99%) held fast from late February to May and didn't react with any moves to safehaven’s. Even better, we continued to rebalanced our clients account into the storm, buying equities and regaining their targeted asset allocations. Rebalancing helps mitigate risk, and it is a staple of our advice. Beta Wealth clients truly keep a long-term perspective and don't get thrown off by short-term volatility.

Why is staying the course so important? As an extreme example, consider the investor who lost faith in the markets and cashed out on March 23, the low point in the U.S. stock market. Stocks subsequently rebounded more than 39% over the next three months; the unfortunate individual who moved to a money market fund earned a meager 0.14%. Our analysis found that about 85% of investors who fled to cash would have been better off if they had just held their own portfolio.

Even Keeled at All Times

Just as investors should stay even-keeled during downturns, they should ignore the euphoria of a sudden surge in the market and the fear of missing out on easy gains (also known as FOMO). One byproduct of the market churn is the renaissance of day trading among individual investors. Online brokerage platforms saw new accounts spike in the early part of 2020, with many of these investors looking to capitalize on "hot" stocks or engage in speculative moves. Fortunately, the vast majority of Beta Wealth investors are staying disciplined and avoiding speculation. We have seen this movie before and know how it ends for the FOMO crowd—an expensive lesson about diversification.

Thank You to Our Clients

We would be remiss if we did not thank you for staying disciplined and focused on the long run. We are here to help reinforce those best practices and are grateful for the commitment each of you has shown our company. Your confidence in Beta Wealth Group as your investment partner is never taken for granted. As always, never hesitate to reach out to me with any questions or concerns. 

Yours Truly,

Jodi Vleck, CFP®