I don’t know who needs to hear this, but ……..
Stocks don’t always go up. I can’t believe I need to be saying this, especially since we either experienced 2008/2009 first hand with our own portfolios and wallets, or we watched what it did to our parent’s portfolios and wallets. Watching the madness in the markets over the past 24 months have virtually wiped our memory of how 2008/2009 felt and replaced it with an idea that markets only go up.
I do not think the sky is falling. The market will go down, and then back up, and down again, and the rollercoaster ride will continue. It’s how markets have functioned since the beginning of their existence. Take a look at the chart below. It shows the calendar year returns for the S&P500 along with the intra-year declines. In every single year since 1980 the market has been negative at some point for the year.
What this doesn’t mean
What this chart doesn’t mean is that now that markets are off their highs by a few percentage points, it is a generational buying opportunity the way I have heard some talking heads on TV describe it. The best part of this ludicrous assessment is that its always a generational buying opportunity. The earlier you invest and allow your money to compound the more you will have. That isn’t a prediction, that is just math. Don’t tell the talking heads on TV though, they don’t let facts get in the way of a good story.
Playing the probabilities
The best way to make sure you remember that volatility isn’t the end of the world, and that sticking to a plan works is through some sort of visual aid. The below chart is more powerful than any words I could say. It shows your likelihood of making money over time in the market.
Hint: The longer you stay invested the more likely you are to make money!
We’ve all heard it before, and I will say it again. “Everyone has a plan until they get punched in the mouth” This is true if you get punched in the mouth by Mike Tyson, sure, but for most of us we can think on our feet even during times of stress. Having a plan is the only way you can work yourself through not just the crazy times we have gone through, but the crazy times that are sure to be up ahead.
It is easy to let your emotions get the best of you when your dry cleaner is telling you about his gains trading Bitcoin, or while a talking head on TV is telling you that since the market is 4% off its highs it is a “generational buying opportunity.”
While this is going on, social media is showing up the absolute worst that our country has to offer, but since those people are the loudest, we think they are the majority and that adds to our general anxiety. All of this can derail your financial success, but having a plan, working the plan, and constantly monitoring and tweaking it will keep your blinders on working towards that beach house in retirement.
So how does this impact all of you?
- Stocks don’t only go up, but over time the likelyhood of being higher rises
- Time makes you money in the market.
Stock market calendar this week:
Thursday March 11th:
Initial and continuing Jobless Claims @ 8:30AM