Are You Concerned About Volatility?
.webp)
By Ben Dolan, CFP®
There’s no way around it; the news has been unsettling lately. War in Iran has caused a clog in the strait of Hormuz resulting in a spike in oil prices. A prolonged conflict could cause oil prices to remain elevated. Higher oil prices for longer will have a deleterious effect on the global economy given that 20% of the world’s oil production passes through the strait.
As of the end of last week, all major US stock indexes were in negative territory, with the S&P 500 off 3.1%, the Nasdaq down 4.89%, and the Dow negative 3.1% year-to-date. While the US has not committed to boots on the ground in Iran, President Trump has asked other countries to help provide relief in the strait. Doing so could be precarious if Iran successfully implanted mines along the main shipping routes.
War is always unsettling. I’m praying for the lives lost and for a quick end to the conflict. Volatility in financial markets is also unsettling, especially for those of you new to or about to enter retirement. You’ve worked hard, and the prospect of a falling market is scary.
Although it’s my job to help others navigate markets, I’m not immune to concerns around financial markets. After all, I spend more time than most watching markets fluctuate (and I’m invested in the same funds as my clients…when they lose value, I lose value). However, I’m probably less concerned than the average investor when volatility arises because I’ve found a way to successfully reframe how I think about my investments.
When markets are unsettling, I stop looking at the value of my accounts and count the units I own. For example, one unit of DFAC (Dimensional US Core Equity) is currently trading at ~ $39.40. If I own 100 units of DFAC my current value is $3,940. If tomorrow the price drops to $25 per unit, my value drops to$2,500. But the number of units I own has not changed. I still own 100 units, unless I sell them.
The question, then, is what do the 100 units represent? Well, DFAC invests in over 2,500 companies in the US (almost all of the available US stock market). Therefore, each unit I own represents my direct ownership in those businesses.
This means that my unit represents ownership in a piece of America’s future. Do I want to own a piece of America’s future despite what’s happening in the moment…you bet I do!! And now that it’s dropped to $25, perhaps I’ll buy more, because the price has gone down!
My job as an investor is to collect units. Sometimes the market will tell me they are worth less, more often they will tell me they are worth more.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.
Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions.
Past performance is not indicative of future results. Dolan Capital Advisors, Inc. does not guarantee any specific outcome or profit. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Risks will arise, and an investor must be willing and able to accept those risks, including the loss of principal.
Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance, or events to differ materially from those expressed or implied in such statements.
Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors, Inc., a SEC-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.