Granite Wealth Management

Eat the Apple

An apple a day keeps the doctor away.

This isn’t literally true, and the real lesson is in the strategic view of what happens over time.

The apple represents something good for you. The day refers to the consistency of which the consumption of something good should occur. Keeping the doctor away metaphorically represents avoiding negative results (because we all know how much we dread taking time out of our lives to visit with our doctor, nevermind what the doctor might tell us about our lifestyle).

The bigger picture. The long term. The 30,000 foot view. All these synonymous phrases we hear tell us exactly how we should be viewing everything we do: focusing on good habits in the short term to maximally benefit us in the longer term.

The stock market got brutalized in 2022, with stocks down 18% in the US, and the bond market nearly paralleled those results with a 17.8% decline over the same period. Comparatively, cash (as measured by 3-month Treasury bills) was up 4.4% for 2022.

The annual returns though, as kindly organized every year by NYU’s Aswath Damodaran, show a curious picture from the longer term. Annual returns, when averaging from 1928 to 2022 look attractively different:

Stocks: 9.6%

Bonds: 4.6%

Cash 3.3%

I won’t argue that there are always ways to manage changes in market action and sentiment, though it’s worth mentioning that it’s most easy to highlight beneficial routes to navigate any market in hindsight. What the data tells us, truly, is something we already know: the value is created in the long term.

If you can avoid downturns in a market, even partially, that is great! Though if asked about your satisfaction in averaging almost 10% growth per year over your lifetime, what would you say?

We know that the data tells us that the stock market and bond market usually grow on average. We also know that in any given year, the stock market can do anything (and nobody can predict it).

The problem comes, however, when we focus on what the market did recently, or what the market did in a specific year. We also tend to put much more weight in periods where the market performed poorly. If we simply let the averages over the longer period guide our investing behaviors, we can remove the feelings that inherently come with investing (fear, worry, confusion, doubt).

What you can do is continue forward with your financial plan regardless of the external variables (i.e. recent market performance). This means ensuring your emergency cash reserves are there for you in cash or a money market. This means contributing regularly to your retirement and non-retirement accounts and staying invested. This means reducing unnecessary expenses in your month–to-month life. This means driving your earning capacity higher by becoming more promotable and marketable. This is how you avoid the doctor’s office.

The “apple a day” is paying regular attention to your financial plan.

Eat the apple.