The first minute of the video below might make your heart race. The barrage of market headlines and sound bites is enough to make your blood pressure rise. But then the noise dissipates…and gives way to a sense of calm.
This short video produced by Dimensional Fund Advisors is a great reminder that volatility is a normal part of investing, even though it can create a lot of distracting “noise.” Finding a trusted professional who can help you block out the racket and focus on your long-term goals can lead to a calmer, more successful investing experience.
The chart below is another good depiction of the benefit of a long-term focus. Even after events deemed by many as catastrophic, markets tend to respond quite well in the years that follow. We believe that by staying the course and focusing on long-term outcomes rather than short-term volatility, investors can have a better chance of reaping the rewards of staying invested while experiencing less stress while riding out market cycles.
Performance of a Balanced Strategy: 60% Stocks, 40% Bonds Cumulative Total Return
In US dollars.
Represents cumulative total returns of a balanced strategy invested on the first day of the following calendar month of the event noted. Balanced Strategy:12% S&P 500 Index,12% Dimensional US Large Cap Value Index, 6% Dow Jones US Select REIT Index, 6% Dimensional International Value Index, 6% Dimensional US Small Cap Index, 6% Dimensional US Small Cap Value Index, 3% Dimensional International Small Cap Index, 3% Dimensional International Small Cap Value Index, 2.4% Dimensional Emerging Markets Small Index, 1.8% Dimensional Emerging Markets Value Index, 1.8% Dimensional Emerging Markets Index, 10% Bloomberg Barclays Treasury Bond Index 1-5 Years, 10% FTSE World Government Bond Index 1-5 Years (hedged), 10% FTSE World Government Bond Index 1-3 Years (hedged), 10% ICE BofAML 1-Year US Treasury Note Index. Assumes monthly rebalancing. For illustrative purposes only. S&P and Dow Jones data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. ICE BofAML index data copyright 2018 ICE Data Indices, LLC. FTSE fixed income indices © 2018 FTSE Fixed Income LLC. All rights reserved. Bloomberg Barclays data provided by Bloomberg. Dimensional indices use CRSP and Compustat data.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Not to be construed as investment advice. Returns of model portfolios are based on back-tested model allocation mixes designed with the benefit of hindsight and do not represent actual investment performance. See “Balanced Strategy Disclosure and Index Descriptions” pages in the Appendix for additional information.