When Headlines Worry, Bank on Informed Planning

April, 2023

Regulators took control of Silicon Valley Bank as a run on the bank unfolded at internet speed last month. Two days later, regulators took control of a second lender, Signature Bank. They were the second and third largest bank failures in U.S. history. Alarming media headlines have caused many to anxiously eye their portfolios for exposure to banks, regional or national.

We are confident that government intervention will cover potential losses for depositors of any bank that fails — at least this time around. Still, rather than worry about the security of a portfolio planned by Professional Financial when yet another crisis is headlined (do the headlines ever stop?), keep in mind the investing principles derived from financial science that are the foundation of your investment management strategy. Next keep in mind how critical you are to the long-term success of your investing goals by being committed to your investment strategy.

The banking crisis likely will have little impact on your long-term planning outcome. Client portfolios are implemented based on expected returns within the boundaries of your risk preferences and time horizons. Typically, the biggest goals such as for retirement have long-term event horizons. Properly informed planning allows for the anticipated time frame of expected future cash needs for retirement income or some other purpose. By staying focused on your plan and our time-tested principles, you can avoid making potential market-timing mistakes unrelated to whatever crisis is going on.

1. Uncertainty Is Always Unavoidable

Remember that investing is inherently risky. Uncertainty is unavoidable. Consider unpredictable events of the past three years: a global lockdown, the Russian invasion of Ukraine, spiking inflation, and persistent recession fears. Each provided some reason for panic. Despite all of these occurring, for the three years ending February 28th of this year, the Russell 3000 Index (a broad market-capitalization-weighted index of public US companies) returned an annualized 11.79%, slightly outpacing its average annualized returns of 11.65% since inception in January 1979. Such surprising returns support accepting market ups and downs and sticking with your plan.

2. Market Timing Is Futile and Costly

Inevitably, when news is bleak and headlines declare disasters in many places, investors’ thoughts reflexively turn to some version of market timing. The notion of selling to avoid near-term pain of loss is highly seductive. But research and practice repeatedly show that timing efforts lead to missing larger longer-term gains. The negative impact of missing market turning points and selling just ahead of a turnaround can far outweigh the benefits of feeling safe. Temporary relief is replaced with long-term regret of lost opportunity.

3. “Diversification Is Your Buddy”

Nobel laureate Merton Miller famously remarked, “Diversification is your buddy.” Informed diversification is the closest thing you can have to a “free lunch” in investing. Thanks to financial innovations over the last century such as mutual funds, and later ETFs, investors like you can access broadly diversified, sophisticated strategies like those of Dimensional Fund Advisors at very low costs. While not all risks — including a systemic risk such as an economic recession — can be diversified away (see Principle 1 above), diversification is still an incredibly beneficial planning tool that mitigates most concerns about the fate of individual companies.

The concept of globally structured diversification will not make any headlines. Yet like so many financial innovations over the last century, highly sophisticated investing that not even the wealthiest once could have, is highly accessible and affordable today. How does informed diversification work?

Diversification reduces the potential pain caused by poor performance or failure of a single company, industry, or country.1 As of February 28, Silicon Valley Bank (SIVB) represented just 0.04% of the Russell 3000 of U.S. major stocks, while all regional banks combined represented only 1.70%.2 For those with globally diversified portfolios structured by Professional Financial, the portfolio impact of failure was minuscule: For instance, as of February 28, SIVB was just one of more than 9,000 companies in the MSCI All Country World IMI Index (MSCI ACWI IMI) and represented a mere 0.03% of the index. As of the same date, regional banks in total represented only 1.15% of the index, with the largest at 0.10%. Despite bank failures, global diversification within an informed investment strategy drives more reliable outcomes for those sticking with their planning.

chart showing weights of Silicon Valley Bank and Regional banks in MSCI ACWI IMI


A systematically structured portfolio strategy for your family — the accumulated wealth you must depend on for your lifestyle and lifetime — will help you weather periods of headlined uncertainty. Essential to an informed investment strategy, is a trusted advisor who can guide you in remaining disciplined and sticking with an informed plan through uncertain times while pundits predict gloom and doom.

Planning for what can happen is far more reliable for gaining positive outcomes than trying to predict what will happen. Those who gained the best long-term outcomes from their systematic structured investing, were those who stayed disciplined through uncertain market ups and downs, who learned to stop listening to all that media noise.


1. Consider that a study of single stock performance in the US from 1927 to 2020 illustrated that the survival of any given stock is far from guaranteed. The study found that on average for 20-year rolling periods, about 18% of US stocks went through a “bad” delisting. The authors note that delisting events can be “good” or “bad” depending on the experience for investors. For example, a stock delisting due to a merger would be a good delist, as the shareholders of that stock would be compensated during the acquisition. On the other hand, a firm that delists due to its deteriorating financial condition would be a bad delist since it is an adverse outcome for investors. Given these results, there is a good case to avoid concentrated exposure to a single company. Source: “Singled Out: Historical Performance of Individual Stocks” (Dimensional Fund Advisors, 2022).

2. Regional banks weight reflects the weight of the “Regional Banks” GICS Sub-Industry. GICS was developed by and is the exclusive property of MSCI and S&P Dow Jones Indices LLC, a division of S&P Global.