We have an immense amount of information to filter through these days. Even if we carved out the political news and Facebook posts and focused solely on the financial information, that data set comes in at a fast and furious pace. So individual investors have to sort through the huge mess of data to try to make sense of it all. What should I do if the S&P 500 just crossed over its 50-day moving average? What are the implications of the dollar weakening? Are valuations stretched or not? There is so much to digest, it can be hard to know if the stock market is up or down for the year.
Let’s start by clarifying that the stock market is doing well so far this year. In the US, the S&P 500 is up over 9% and international stocks are performing even better with double-digit returns on the MSCI EAFE index. Economic indicators, such as GDP growth coming in at 2.6% for the second quarter, and continued low unemployment rates suggest that the US economy is doing fairly well. These positives seem to run counter to daily headlines of threats from North Korea, global terrorist tragedies, and a potential downturn in the stock market. With all of these “trees” blocking our view, how are we to see the forest?
Identifying and prioritizing a few major financial goals is one of the most important steps, as this helps guide decision making. Whether it is saving for a home purchase or renovation in the near future, saving for your children’s college education, or planning for an early retirement in 10 years, you need to know what it is and have a plan to achieve it. Making decisions based on that blueprint will enable you to step back and see the bigger picture. You can still be aware of the weekly gyrations of financial markets but not consumed by them.
My family and I were fortunate enough to enjoy a recent trip to Costa Rica. What an amazingly beautiful country in so many respects! The natural beauty is breathtaking. However, the Costa Rican culture was even more impactful. They have a saying – Pura Vida – which means ‘simple life’ or ‘pure life’. It is more than just a saying; it is a way of life. They focus on what is important to them and ignore what they cannot control, layering on generosity and a positive spirit that is palpable and inspiring. We could all learn a bit from their perspective to appreciate the simple things in life and focus on the forest, not the trees.