Kennon Financial: Largest One Day Point Loss in History of the Dow Jones (Who Cares?)

panic and delete buttons on keyboard

Dave Kennon, Kennon Financial

I thought for this week it would be timely to remind you of the importance of a long-term view when it comes to investing. As technology changes and evolves, people find it easier and easier to stay “up-to-the-minute” on the economy and developments in the stock market. Last year I was playing golf, and the retired gentlemen I was with would take out his phone at every hole and check on his portfolio.

Every. Hole.  

Not only is this kind of hyper-vigilance unnecessary, but it is also bad for your health. Stressing yourself out over market fluctuations on a daily, or even hourly basis can contribute to stress-related ailments like high blood pressure and heart disease.

Plus, if you’re always looking at your phone for financial updates, you’re missing out on an awful lot of life.

It hasn’t always been this way.

I asked my Dad once, “How often did you get an update on the markets?” He thought about it for a second and said, “I guess on Friday evenings Walter Cronkite would announce what the Dow Jones had done during the week.”

If you stop focusing on the minute to minute machinations of the markets, you are going not only experience more peace in your life, but ironically, you will probably be more successful with your investments.  

Here’s a quick stock market reality check.

The following table shows what would have happened if you invested your money in the S&P 500 index for various 20-year time periods. The S&P 500 is, very simply, the 500 largest U.S. based publicly traded companies.  

Time Period

Average Annual Return (Per Year)

1997-2017

7.19%

1990-2010

9.13%

1980-2000

15.67%

1970-1990

11.16%

1960-1980

8.33%

1950-1970

12.1%

1940-1960

14.75%

Viewing that data, my initial reaction was, “Holy Moly! That is incredible! Why isn’t anyone talking about this?!”    

As I write this article, the markets have had a very difficult couple of weeks. At one point the Dow Jones was 10% off its all-time high. I want to direct your eyes back up to the chart. Don’t make this more complicated than it is. Free markets inevitably “correct” themselves, and while we have no idea when it is going to happen, it is a normal and healthy component of the economy. When you take the time to develop a plan consisting of a diversified portfolio and stocks and bonds, it should give you the freedom to stop paying attention to short-term fluctuations.  

The stock market is not going to bankrupt your retirement.

Let’s get real.  When it comes to retirement planning, the stock market is not going to bankrupt you. As a general rule of thumb, I have my clients spend 5% of their account value on an annual basis. Regardless of what the market is doing right this very moment.  

Why is this such a reasonable plan?

Let me put it this way. If the stock market between now and the end of your life does not return an average of at least 5% per year it is the first time in modern economic history where it hasn’t.  

I’m going to say that again for dramatic effect:  If the stock market between now and the end of your life does not return an average of at least 5% per year it is the first time in modern economic history where it hasn’t.  

“But, Dave, what if the markets crash and I lose all my money and I have to go back to work and I become a burden to my children and I die alone and penniless in the gutter!”

Stop. Take a breath.

While I can’t guarantee what is going to happen in the future, the stock market has been consistently creating wealth for over 200 years. Before the light bulb was invented, the stock market was creating wealth for those who use stayed the course, didn’t panic, and allowed their portfolios to grow over time.  

When you join the Retirement Revolution you are going to stop thinking and acting like everyone else. You are going to confidently live your life, without fear, empowered with the knowledge that your money will continue to work for you once you are no longer working.  

You are going to turn off the TV and say, “I don’t care what the markets are doing today. It doesn’t matter. I am going to start spending the perfect balance between too much and too little.”

And then, you’re going to go live an awesome life.

If you would like to attend one of my Retirement Revolution classes, you can register here.  In it you will learn how to loosen the grip fear has over your retirement, and become empowered to live your best life possible. There is a lot of noise out there — most of it negative.

It’s time you got the other side to the story.

Be Blessed,

Dave Kennon, Kennon Financial

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