Token Advice - #12 📈

2023 Year-to-Date Total Returns:

The S&P 500 and Nasdaq are currently on pace for their worst month since last December. Cryptoassets have struggled heavily this month as well. At a highly anticipated Jackson Hole meeting last week the Federal Reserve Chairman, Jerome Powell, mentioned that they’re “prepared” to hike interest rates further if needed to curb inflation. He stated “Two percent is and will remain our inflation target.” On top of that, political debates have started in preparation for the 2024 U.S. presidential election. Most news sources are delivering sentiment of caution. But what happens if we zoom out a little bit? In our view, the market tells a different story.

The S&P 500 is down nearly 4% in August, but it’s up almost 16% year-to-date on a total return basis (total return means including dividends). On a similar note, the Nasdaq is down 5% in August, but is up a whopping 37% year-to-date. Cryptoassets such as Bitcoin and Ether had down months as well, while they are leading all risk assets in year-to-date returns. We can’t predict where the markets will head next, but the point we’re making here is that it’s been a pretty dang good year and one month of selling doesn’t override that. Down months are not uncommon, here’s a look at the monthly returns of the S&P 500 going back five decades (via officialdata.org):

There are too many negative months in the above chart to count. Yet over this time period, the S&P 500 returned 17,645% on a total return basis. Over 10% per year.

From the cryptoasset standpoint, volatility in the short-term is even more prevalent. Periods of negative returns are the expectation, not the outlier. Here’s a look at Bitcoin and Ether quarterly returns (via Coinglass):

Over these time periods both BTC and ETH produced returns well over 10,000%.

The goal here isn’t to raise expectations of future return. The past is in the past and markets are highly unpredictible. However, what we do want to do is challenge you to think about the “why” behind your investments. If you own a portfolio of stocks, cryptoassets and other risk assets, what role do these assets play in your overall financial picture? For us, these assets are viewed only on a decade plus time horizon. They could help someone retire. They could help someone start their own business a decade or two from now. They could help a child go to college. So ask yourself, why are you investing in risk assets in the first place? What purpose do they serve in your overall portfolio? Determining whether to buy/sell these assets based on a month or even a year worth of performance is often one of the fastest ways to experience disappointment. Markets don’t go up in a straight line. They never have, and never will. As investing legend Warren Buffet puts it “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

 Read More on Tax Reporting Proposal Here

At 401 we believe that ‘holistic’ financial planning involves conversations around all areas of a clients life, especially their health. If health is truly wealth it’s imperative that we help our clients align their financial and physical health. Our health planning program is designed to support clients that want help maintaining a highly quality lifestyle. We provide some base level biomarkers for health tracking, personalized health plans and encourage having ‘walking meetings’ whether in person or virtual. 

Above you’ll see an example of the 401 Financial Wellness Portfolio. It is a health version of our financial portfolio allocated to the areas we think are the core of any quality health and wellness program. You’ll also see the activities to from very ‘crypto’ risky like sprinting to a ‘cash equivalent’ like walking. Like any good portfolio the activities chosen should be adjusted based on age, goals, time horizon and current physical status. Feel free to share it with family and friends as they embark on their journey to health, wealth and prosperity! 

401 Financial Cohort

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