The stock market finished the first half of 2022 by realizing its worst start in over 50 years. The poor performance was due to rising inflation and the corresponding action of the Federal Reserve to raise interest rates.1 Despite a difficult investing year, The Ross Group cautions investors against thinking they need to drastically change their financial goals and objectives based upon a six month period. Expectations about future wealth should not be borne from either difficult or successful years in the stock market.
Investors cannot become wealthy or destitute in a short period of time. It is easy to imagine wealth being made or destroyed overnight, but wealth creation is a long-term process. Those investors who constantly monitor the daily, weekly, monthly, or even yearly market movements have their sights set on the wrong metric for future success. Our team cautions investors against measuring their wealth upon shifting markets, whether it is a bad year (2022) or a good year (2020 & 2021). Instead, we believe a rising income stream creates wealth over the long term. Investors should measure their successes and failures based upon the cash flows from their holdings. If those cash flows have an upward trajectory, investors do not need to keep an eye on the daily machinations of an ever-changing market. In fact, 2022 is turning out to be another strong year for dividend increases as quarterly dividend payments just hit record highs.2 High-quality businesses continue to reward patient shareholders with a rising dividend.
Rome wasn’t built in a day and neither is financial success. It is a long-term process that takes time and patience. Our team plans to stay grounded in our disciplines, despite what the tape might read on any given day. We will celebrate every dividend increase announcement much more than the short-term move in a stock price. Each dividend increase lays another brick in the foundation of an investor’s portfolio. Warren Buffett once said the following about investing: “The stock market is a device for transferring money from the impatient to the patient." Like Mr. Buffett, we should all be cognizant of the fortitude necessary to become a great investor. We will focus on those measures, such as dividends, that allow us to have patience during difficult times in the market.