I saw a recent article by Larry Swedroe about how the distribution of stock returns is different than most people think. Stocks average about ten percent a year, and they have for the last ninety years.
Those returns numbers are real, but those returns are bunched. A lot of the upside and downsides are contained within a small number of months. About ten percent of the outstanding months have attributed all of the returns.
There are a couple of big lessons here. One is – you can’t be out of the market. You need to have a disciplined approach to investing, and it’s not all or nothing, it’s whatever is the right allocation for you at the time. You should stay at that allocation and not deviate from it.
The other is if you are going to do tax loss harvesting, don’t wait thirty-one days to buy the same fund back, but buy a comparable fund, so you aren’t out of the market.
If you decide to sell a fund to take a loss, buy something that’s similar and buy it right away so that you’re in the market so that you don’t have to be out of the market for those thirty days because that could be when the markets provide their returns.
My name is Mike Garry, and my company is Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. (That’s in Bucks County). Our law firm is Yardley Estate Planning, LLC and is in the same place. We only do Estate Planning work and I am licensed in Pennsylvania and New Jersey.
If you’d like to talk about this or anything else, please reach out: 267-573-1019, [email protected] or @michaeljgarry
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