Broker Check

The “Wall of Worry”: All in All It’s Just Another Brick in the Wall

November 18, 2016

The “wall of worry” is a term you might hear people in our business use. What does it mean? The common usage of this phrase implies the idea that there are ALWAYS things that the stock market is “worried” about. Many times as investors, we can become overwhelmed with concern about one thing or another. Typically our clients are worried about things that they read or hear in the news about politics, some economic report, some analysis they read that speaks of imminent gloom and doom that is coming our way.

When you hear advisors telling their clients that the stock market loves to “Climb the Wall of Worry”, they are trying to get clients to take a long term view of their portfolios. Advisors can seem to be insensitive to worries clients have. This is because seasoned advisors, and even new advisors that understand the history of markets, know that there is always something to worry about in the markets. That’s what makes markets; buyers and sellers. Buyers want in the market and Sellers want out. Both have information, but have come to different conclusions, usually for a variety of reasons. I know that I have told people that they don’t run out and get an appraisal of their homes or real estate every day, even though their homes and other real estate change in value each and every day. They just can’t see these changes in value. Sometimes I feel it is unfortunate for us that we get pricing every second of every day that the market is open, and clients can see these changes and fret about something that went down in value the last hour, day, or month. The clients’ house may have also gone down in value the last hour, day, or month, but the client just doesn’t get a statement that reflects this.

Advisors, especially ones that have been around the block a time or two, can seem to hold the clients worries in a sometimes less apocalyptic light than the client. It has struck me from time to time that some advisors use this wall of worry idea to goad people into extremely bullish or bearish stances, when probably the most reasonable approach is to set a good target for your mix between stocks and bonds, and let that work for you over time.

The good advisor knows that over time, stocks produce higher returns than bank CD’s and bonds. We know this to be true because it is true. It is undeniable. It is just numbers. The good advisor tries to find at what levels this mix between stocks and bonds is appropriate for each client, and then let the markets work for the client. Our real value as advisors often has to do with the psychology of dealing with clients’ fears, and helping them maintain a long term outlook. I also know for a fact that part of our real value is helping our clients run the gauntlet of administrative tasks surrounding their money and portfolios. This can be daunting, especially in times of personal or emotional distress. We strive to help with the sometimes confusing jumble of forms and papers that all firms require to handle money in a way that is compliant with all the rules and regulations.

Don’t let the “Wall of Worry” keep you from the best long term portfolio for you and your family. Let us sweat it out for you. If we become worried about a particular security, or market, we will do something about it. That’s what we do.

Contact us today to learn more, or to discuss with us how we can help set up a portfolio that is right for you.