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Murphy’s Law

Murphy’s Law! If anything can go wrong, it will go wrong.


Last week our five-year goal of becoming a registered investment advisor was becoming a reality, and over the previous five years, we planned, did hundreds of meetings, battled, vetted companies, researched, and practiced our move. We were ready for one of the most significant decisions in Valley Financial Groups’ history, and then Murphy spoke. COVID struck down the office.

Why does it always seem when things can go wrong, they always will? Have you ever experienced Murphy’s Law?

The weather forecast was great for a big event, the day of the event it’s raining.

There are five lines at the grocery store, and you get in the one that is the slowest.

You buy a stock when it’s just going up and doing great. The next day it goes down. You hold the stock, and it continues to go down, and then you sell it, and the next day the stock goes up.

Warren Buffet once said, “nothing recedes like success.” This quote highlights Murphy’s Law of Finance. A stock, ETF, or fund that returns much higher or lower than the average must go sooner or later back to the average; this is called the reversion towards the mean.

Many investors have felt the beat down from Murphy’s Law over the years. For those investors with short memories and forget the damage Murphy did in the past, remember assets like Cisco, GE, Sears, Lucent, real estate, and banks in 2008. Those investors who ignore and deny the likelihood of an investment returning to the averages usually wake up feeling extremely disappointed.

The odds of an investment outperforming the market is fifty-fifty. Rather than invest in long shots like Bitcoin, marijuana stocks or hold a portfolio of six stocks that make a significant percentage of the index, we believe to navigate around Murphy; you need a plan, a diversified portfolio (variety of investments rather than some or one) and patience. JP Morgan Guide to the Market illustrates that the average investor from 1999-2019 has returned 2.5%, and during the same time, the S&P 500 has returned 7%. A 60% stock and 40% bond portfolio (invested S&P 500 & Bloomberg Barclays US Aggregate Index) returned 6.1%.1 Why did this return discrepancy occur? Was it chasing winners, or was it bad timing? Was it Murphy’s Law and reversion towards the mean?

Again, we believe a plan, a diversified portfolio, and patience will help get you on the right path for financial success and we know that having a team at Valley Financial Group and a plan got us through the COVID situation in our office last week. If there was only one of us at Valley Financial Group, Murphy’s Law and COVID probably would’ve taken us down and prevented us from accomplishing our goal of converting our business to a Registered Investment Advisor last week. Having a team and a plan made it possible to move our new business model, allowing us to offer our clients the better experience they deserve. We are happy to say everyone is healthy. We thank our team for being strong and dedicated, and we thank our clients for being patient and loyal. We wish wealth, health, and long life to all of you. Stay safe.


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