The stock market hit a new 52 week low a whopping 13 times last year. That’s more than what we saw over the entire last decade and nearly twice as many times as what occurred during the booming 90s. Banks are starting to fail, inflation is still stubbornly high, and commentators are creating clickbait titles that the next financial crisis is coming and/or is already underway. You may be asking yourself, “With everything that is going on in the world, should I just bury my cash in a coffee can in my backyard?”
A few weeks ago was the 14th anniversary of the 2008-2009 stock market bottom. Below is a small sampling of the negative headlines we’ve been bombarded with since then, where you could have thought the same “with everything that is going on…” phrase. Certainly any of these 42 events could have, at the very least, caused concern if not outright panic, particularly if you did not have a plan in place that ensures your retirement will not get delayed or completely derailed if already underway.
Things that have never happened before happen all the time. There’s always a reason to worry, but worry is like a rocking chair. It will give you something to do, but won’t get you anywhere, at least not anywhere you want to be. In the case of investing, worry can lead to emotional decision making and potentially to ruin. If you treat the stock market like a casino, it will respond in kind. Las Vegas Boulevard wasn’t paved by gamblers who won long term. Instead, the stock market should be treated like what it actually is, which is a place where you have the ability to become an owner of thousands of large and successful companies. If you owned your own business, would you have sold your business during any of these 42 headlines, especially if it meant you had to sell it for less than before?
Since the 08-09 bottom, the S&P 500 is up over 700%. That means if you would’ve invested $100,000 then, you’d have over $700,000 more today even after accounting for losses last year. To put it another way, to have a million dollars today, one would have only needed to invest $125,000 14 years ago and over 87% of the money you would have now would be from gains.
The reality is that if you have a good financial plan in place, the short term direction of any financial asset should not matter. Whereas, if you rely on correctly guessing a direction, you are almost certainly doomed. Even the highly-paid analysts on Wall Street are wrong significantly more often than right. In 11 out of the last 13 years, the stock market ended the year either higher than what the highest estimate of any analyst was or lower than the lowest (as we pointed out in a previous article).
March also marked the 3 year anniversary of the economy being shuttered and the fastest bear market ever happening (which caused nearly 1/3 of those over 65 to sell everything at or near the bottom, something we’ve also highlighted before). Since then, the market has nearly doubled in value.
It is not a question of if, but when, and how many negative news headlines and financial market corrections will occur during the average retirement. If the stock market or any current event has you worried, the problem is not the stock market, nor any current event. The problem is a lack of a plan (or a poor plan) and likely also your portfolio. If you’ve uttered the phrase “with everything going on” anytime lately in reference to your money, you should talk with a financial professional that doesn’t just say “hang in there” when times inevitably get tough, but instead helps you create a worry-free plan to get to and stay in retirement. Find someone who can explain exactly why your particular plan will get you ever increasing income in retirement (to offset ever increasing prices) without having to worry about the short term direction of any financial market. With a plan that ensures you receive the cash flow you want and need regardless of what is happening, you’ll probably never be tempted to sell your business ownership because of “everything that’s going on.”
Material discussed is meant for general/informational purposes and is not intended to be used as the sole basis for any financial decisions, nor be construed as advice to meet your particular needs. Please consult a financial professional for further information.