Stop watching the dog and keep your eye on the owner…

May 13, 2019

Stop watching the dog and keep your eye on the owner…

May 2019, by Mike Boyle, CFP®

As coaches, we are always on the lookout for teachable moments. In caring for hundreds of client households, we would be remiss if we didn’t acknowledge significant investment account value dips during the 4th quarter of 2018, and strong share price recovery through the end of April 2019. 

First a few facts:

  • The value of the S&P 500 index fell almost 20% at one point during the 4th quarter of 2018, and for the full calendar year was down about 4.4% (with reinvested dividends). Note: small cap domestic and international stock indices had a double-digit dip in 2018.
  • The value of the S&P 500 index gained 13.6% during the 1st quarter of 2019 (with reinvested dividends).

Putting these facts together in dollar terms:

  • $100 invested in the S&P 500 at the start of 2018, was at one point valued down around $80, but finished the year valued at about $95.  
  • By the end of March 2019, the investment reached a value of approx. $108.

Solid progress in a span of 15 months – but what an adventure requiring patience and confidence along the way!

The lesson:

If we all had the luxury of just seeing annual stock share price valuations, no one would have to endure watching the wild ups and downs.  It would also limit the number of news media headlines predicting the world going to hell in a handbasket.  But, since stock share prices are valued daily, such headlines are just a few clicks away on a smartphone – hence we wish to propose a strategy for keeping a healthy perspective.

As a financial planning firm, we coach clients to adopt the following perspective:  Stop watching the dog and keep your eye on the owner….

If you are on a beach after lifeguards and most others have gone home for the evening, you will often see a walker with her dog off leash.  The dog owner is gradually walking along the water in a very specific direction. Yet, her dog is often running into the water, then up into the sand to chase a seagull, then back into the water, etc. 

In this analogy, the dog represents the volatility of daily/monthly/quarterly stock share prices….they can move a lot in a short amount of time in several varying directions. The owner is a good proxy for the actual true value of a share of stock over time— she has a specific direction and destination that given enough time will likely be reached.  Of course, she may pause occasionally, even backtrack a bit to pick up a shell or get her dog’s attention. Heck, even the dog’s more volatile zigs and zags don’t reach what the news media would lead you to believe…the dog’s run into the water doesn’t mean he will swim out to sea with no land in sight, and a dog’s run to the dunes doesn’t mean he is destined to eventually arrive at the Grand Canyon. 

Similarly, the value of a diverse mix of stocks (aka: partial ownership in many companies represented by the S&P 500 index) has historically gone in a very specific direction (up), albeit with some occasional and significant dips in value.  For example, the S&P 500 index was valued at $102 on January 1, 1969, when many 50 year old clients were born.  It was valued at $2,602 on January 1, 2019.  Not counting reinvested dividends, their investment in the S&P 500 index for that 50 year period was up 25 times.  Most importantly, for all investors, and especially retirees who often require a rising income over several decades in retirement, inflation only required $7 by 2019 to buy what $1 bought in 1969.  So, if you are appropriately concerned about what inflation might do over time in retirement, the value of an investment in a diverse mix of companies represented by the S&P 500 index increased 25 times, while the cost of buying stuff increased by only 7 times.

Of course, the historical relative difference of stock values versus inflation doesn’t guarantee anything about the future – but if I am looking for a sunny destination I might use historical sunny days per year to compare Phoenix to Seattle…one has about 300 and the other only 150. 

So, whether you go to the actual beach or shore this year or not, please consider a strategy of “stop watching the dog and keep your eye on the owner” as you decide what frequency you find most healthy to check investment account values.  Hint, daily is not recommended! 

On behalf of our team, we wish you a safe and enjoyable spring and summer!




All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.