April 2023 White-Labeled Client Letter
Bank Failures, Recency Bias, and Planning vs. the Plan
From this Month’s Client Letter for Planning-Focused Financial Advisors
The second takeaway for investors is our inability to accurately or consistently predict the future.
Though Silicon Valley Bank’s failure appeared almost inevitable in hindsight, executives, investors, customers, and regulators were unconcerned, if not optimistic, in the preceding weeks and months.
What does that say about our ability to make accurate predictions?
In my estimation, it is just the latest data point indicating that we never had this ability in the first place.
Thankfully, sound investing profits from uncertainty. Because no one can predict the future, stock prices, which depend on estimations of future company profits, can fluctuate dramatically throughout the year as new information is digested. The market compensates investors for the ups and downs via returns that outpace cash, bonds, and inflation. For example, over the long term, stocks have beaten inflation by 6.6% annually according to research by Jeremy Siegel.
Continued in this month’s white-labeled client letter.
Remember, the client letters are yours to use, edit, and/or copy however you like as long as they are only directly mailed or emailed to your clients (no blogs or social media posts).
Your Cause is Righteous.
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