Welcome to the February issue of the Select Wealth Management Dashboard Newsletter. What a start to the year! A volcanic eruption in Tonga, flooding on the west coast, record high inflation readings, protesters digging in outside parliament, Omicron in the community. It's all on! In hindsight, it makes sense that share markets here (and around the world) had a terrible January. The tech heavy Nasdaq had it's worst January in it's (relatively short) history, falling by 16%. The New Zealand NZX50 and Australian All Ordinaries both had "technical corrections" – meaning that they fell by more than 10%, and many other share markets had similar moves – so a very volatile start to the year. You could be forgiven for thinking that volatility like this is unusual – it seems pretty scary, right. But if we look at the performance of share markets over the past 50 years, you will see that drawdowns of 10% or more are actually very common. In fact, it happens almost every 2 out of 3 years. The table below shows the returns from the S&P 500 (the American share market) over the past 50 years. It shows the actual return for the calendar year, and the biggest drawdown during the calendar year (i.e. the biggest fall from peak to trough throughout the year). Year Actual return Drawdown Year Actual return Drawdown 1972 18.80% -5.10% 1997 33.10% -10.80 1973 -14.30% -23.40% 1998 28.30% -19.30% 1974 -25.90% -37.60% 1999 20.90% -12.10% 1975 37.00% -14.10% 2000 -9.00% -17.20% 1976 23.80% -8.40% 2001 -11.90% -29.70% 1977 -7.00% -15.60% 2002 -22.00% -33.80% 1978 6.50% -13.60% 2003 28.40% -14.10% 1979 18.50% -10.20% 2004 10.70% -8.20% 1980 31.70% -17.10% 2005 4.80% -7.20% 1981 -4.70% -18.40% 2006 15.60% -7.70% 1982 20.40% -16.60% 2007 5.50% -10.10% 1983 22.30% -6.90% 2008 -36.60% -48.80% 1984 6.20% -12.70% 2009 25.90% -27.60% 1985 31.20% -7.70% 2010 14.80% -16.00% 1986 18.50% -9.40% 2011 2.10% -19.40% 1987 5.80% -33.50% 2012 15.90% -9.90% 1988 16.50% -7.60% 2013 32.20% -5.80% 1989 31.50% -7.60% 2014 13.50% -7.40% 1990 -3.10% -19.90% 2015 1.40% -12.40% 1991 30.20% -5.70% 2016 11.80% -10.50% 1992 7.50% -6.20% 2017 21.60% -2.80% 1993 10.00% -5.00% 2018 -4.20% -19.80% 1994 1.30% -8.90% 2019 31.20% -6.80% 1995 37.20% -2.50% 2020 18.00% -33.90% 1996 22.70% -7.60% 2021 28.50% -5.20% Data source - Bloomberg So most years have a drawdown of greater than 10%, yet if you invested $100 in the S&P 500 back in 1972, it would be worth a staggering $18,723 today (assuming you re-invested all dividends). Volatility is simply an unavoidable reality of investing in share markets. The challenge with volatility of course, is trying to decide how to react to it. The "flight or fight" instinct is very strong in human nature, so most people feel a need to react in some way – any way. Sell some shares, buy some more, change the ones you have – anything to feel like you are trying to address the situation. But the fact is, sometimes the best thing to do is nothing. Just wait and watch intently, as uncomfortable as that may seem. I know I bang on about this all the time, but times like these are where your risk profiling is really put to the test. If you have been through a thorough risk profiling process (i.e. if I've done my job properly), and been genuinely honest with yourself in terms of how much risk you are willing to assume with your investments, then your portfolio would still be well within the parameters of your risk tolerance. Moves in the share markets like this shouldn't scare you. It would still feel uncomfortable (no-body likes to see their investments fall in value), but you would understand that your chosen portfolio is behaving exactly as it should - the same as it has done in the past, and probably will do in the future too. If you are not 100% comfortable with your portfolio, or if you want to go through a risk profiling process again, call us – we are here to help. On a slightly different, but kinda related matter, I wanted to include this extract I recently read about forecasting. I say it's "kinda" related in that it cautions against placing too much credence in any forecasts – something that people often tend to turn to during periods of market volatility. Ted Lamade, Managing Director at The Carnegie Institution for Science writes: "In a world overflowing with data, why are forecasts worse than ever? Just think about the past few years. Nearly every Covid-19 prediction has been off the mark - from its severity and virality to vaccine efficacy and the way equity markets would react to the outbreak. Political predictions have been even worse – few had Joe Biden winning the Democratic nomination in 2020, Trump winning the presidency in 2016, or the Brits voting to leave the European Union that same year. Yet, investors still might be the worst – few had energy and financials leading the way in 2021, fewer thought the market would have doubled off the March 2020 lows, and no one has made an accurate interest rate call in years. Yet, these failed forecasts aren't what concerns me. Our confidence in them does. For some reason, despite repeated futility, forecasters are more confident than ever these days. They have become *convinced *that more data is the equivalent of a crystal ball. Yet if even Albert Einstein admitted that, "the more I learn, the more I realize I don't know," this current confidence seems misplaced. Keep this in mind as you read people's forecasts for 2022 equity market returns, the path ahead for inflation, the Midterm Elections, or the next Super Bowl Champion." Here are the numbers for the past 30 days:   In terms of your Select Wealth Management portfolio, there is nothing to report at this stage. We meet (virtually) with researchers JMI Wealth in March for the quarterly review, so I'll be sure to let you know if there are any developments from this. In the meantime, it's more of the same. Finally, a quick update on our Giving Back program. As you may know, we are working with HUHA (Helping You Help Animals) for the first 6 months of 2022. We've had some really positive feedback regarding this campaign, so thank you for that. January was a pretty slow month (as it always is), so the campaign has gotten off to a rather slow start. But I'm sure we'll make up for this in the next 5 months and be able to make a meaningful contribution to this fabulous cause. To keep track of the Giving Back program visit https://mifinancialplanning.co.nz/giving-back.html As always, thank you for your continued support by introducing friends, family and colleagues to our business as prospective clients – I can't thank you enough. Warm regards Dave and the team at Makowem & Isaacs Financial Planning dave@mifinancialplanning.co.nz

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