Is your portfolio at risk in today’s bull market? The numbers tell the story

Kyle Thompson, CFP®, CPA

The Dow rolled past 23,000 last week for the first time in history, creating yet another milestone for a bull market that just keeps going… and going… and going. And while the seemingly never-ending market highs have some investors jumping for joy, not everyone is feeling so carefree. That’s especially true for investors who still remember the sting of the crash in 2008. It can make even the most experienced investor wonder if now is the time to change course, taking equity gains and shifting into the safety of fixed income investments. If you’re worried about risk today, here’s something that may surprise you even more than the market itself: the biggest risk in the bull market isn’t the high price of equities—it’s you.

I can say that with confidence because I’ve witnessed that risk firsthand. I began my career as a financial advisor in August of 2008, right when the markets were in a downward spiral. What a time to come into the business! And yet as difficult as it was, my experiences helping clients through the crash and into the recovery that followed had an important impact on my approach today. Best of all, it helped me realize the dramatic effect of investor emotions and behavior on long-term outcomes.

That first job of mine was at a firm that believed in active portfolio management, meaning that they chased market returns by allocating—and reallocating—with every shift in the market. Just like most strategies, theirs worked great as long as the market was up. But when the market crashed, they scrambled to hedge the downside risk. As a result, they were positioned on the wrong side and weren’t able to take full advantage of rising stock prices as the market slowly but surely recovered. Across the board, the losers in 2008 were those who tried to hedge and reallocate and second-guess the market, or worse yet, panicked and pulled out of the market when it was at rock bottom.

It may sound strange, but investors face a similar challenge of keeping a cool head in today’s market. For years, the media has been predicting an end to the current bull market with every major event. The Flash Crash in 2010. The Taper Tantrum in 2013. The Oil Recession in 2015. The Brexit vote. The election of Donald Trump. The list goes on. And while there have been a few blips and dips along the way, the market has been on a steady trajectory skyward.

With the market at record highs, it’s easy to think that taking your gains now and getting out before the market takes a turn (and yes, it will take that turn eventually) will cut risk. But a quick look at the three biggest determiners of investment outcomes—the math, the market, and your existing financial plan—paints a very different picture of risk.

The Math

No matter what your age, the math is on your side. Just look at the facts. The average inner-year decline of the S&P 500 is 14.1% a year. Those declines can feel daunting, but they are much easier to stomach if you note that the market has delivered annual positive returns for 28 out of 37 years since 1980.[1] Consider this: despite three major crashes—the dot-com bubble in 2000, 9/11, and the financial crisis in 2008—over the 20 years from 1996 through 2015, the S&P 500 returned 8.2%. That means that if you’d invested $100,000 investment in the S&P 500 on January 1, 1996, that investment would have compounded to $483,666 by the end of 2015. The math gets even better. Since the current bull market began on March of 2009, the S&P has risen from just 676 to around 2,500 today—turning a $100,000 investment into just under $285,000 in just over 8 years. That’s some pretty nice math!

The Market

With every new event, the media loves to grab the spotlight by saying that “it’s different this time.” In reality, history has shown that the market is quite predictable. Over the long term, stocks and equities are far less risky than the media would have you believe. Even after the most dramatic downturns and sustained bear markets, the market run-ups that follow typically far outpace the declines. The result: despite the inevitable downturns, the average return for the S&P 500 since its inception back in 1928 is about 10%. That’s concrete evidence of the power of the capital market.


Source: Compustat, FactSet, Thomson Reuters, Federal Reserve, Standard & Poor’s, J.P. Morgan Asset Management

The Planning Process

If you’ve gone through the financial planning process with our team,  you know that the asset allocation for your portfolio is determined by your long-term financial goals and your personal risk tolerance. If neither of those things has changed, why would you change your strategy? While it may feel ‘safe’ to shift to a fixed-income portfolio to try to protect your portfolio from a downturn, doing so would also isolate your portfolio from the upturn that, in all probability, is just around the corner.

Today’s high equity prices aren’t creating risk to your portfolio. Your biggest risk is, indeed, you.

Investors who react to market extremes and deviate from a carefully constructed investment strategy are in essence trying to time the market—an approach that even Warren Buffet, possibly the most successful investor in history, says is a losing battle. That’s precisely why it is vital to have a sound, trusted financial plan in place based on your personal risk tolerance and long-term investment objectives—no matter what’s happening with the markets in the moment.

If you’re still worried about risk in today’s market, please reach out. I’m happy to walk you through the numbers in more detail and help you make a decision that fits your own risk tolerance and your personal financial goals.

Subscribe to Our Blog

Sign-up for our blog notifications below to stay up-to-date on the latest from Market Street Wealth Management Advisors. 

Sign Up

If you’re still worried about risk in today’s market, please reach out. I’m happy to walk you through the numbers in more detail and help you make a decision that fits your own risk tolerance and your personal financial goals.

Kyle Thompson, CFP®, CPA
Partner | Senior Financial Planner | Chief Investment Officer


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Market Street Wealth Management Advisors, LLC [“MSWMA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MSWMA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MSWMA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the MSWMA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at Please Note: MSWMA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MSWMA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a MSWMA client, please contact MSWMA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.