It seems like the stock market has been going down forever. It has been two years since the peak. Since then, everything has been flat or moving down.
If you are retiring or retired, what do you do? Even though I tell you to look at your account once a quarter (at most), I know many of you don’t listen. I understand that seeing your account go down is disheartening.
You’ve pegged your retirement security on these vehicles. If you are retired, you are probably taking distributions each month. You are taking distributions from an account that is going down. It's not a fun feeling. Not at all.
I’ve been in the investing game for twenty-one years. I’ve seen these kinds of scenarios before. Investing was so much fun in the 2010s. You couldn’t go wrong. All your accounts were going up. In fact, you were taking retirement income checks from the investments AND the account was still increasing in value. What a great feeling!
Now, in this current environment, is when the rubber meets the road. For investors that stay the course, financial success will come their way. Those who panic and sell are breaking the fundamental rule of investment: Don't buy high and sell low. Financially successful people ignore these bumps and focus on other things in their life, like relationships and health.
What have I seen in the past during periods such as this? I’ve seen one phenomenon reveal itself again and again. Whenever the stock market is finished being in the doldrums, it recovers- fast.
After the 2008 real estate crisis, the market had a tough year. Unfortunately, many people bailed out of their investments. But what would have happened if you had stuck in there? In 2009 the stock market returned 25.94%. Let me emphasize this fact by saying: Whoa!
After the internet bubble in the early 2000s, things turned around in 2003. The return that year? 28.89%. Again, when it turns, it turns quickly with an extremely high return.
I’m a history guy. Let’s go back further. During the Great Depression, after four bad years, in 1933, the market returned 49.98% I bet you would have been pretty upset if you threw in the towel too early.
World War II is another good example. 1940 and 1941 saw negative returns, only to see it pop by 19.17%, 25.06%, 19.03%, and 35.82% over the next four years.
Believe it or not, there weren’t any strings of bad years all the way up to the 1970s, where, you guessed it, after a two-year downturn, the markets increased by 37% and 23.83% the next two years.
Every time in the past that markets experienced a prolonged downturn, the year it recovers has banner returns.
Moral of the story. Hang in there. I know it feels like it will take years for your account to recover. When the markets start upward again, it will probably happen quickly. We can’t time the market on this one. If we wait until the markets "look better," you’ve probably already lost at least half of the return.
Here is your homework for this week: Delete the stock tracking app on your phone. When you see the stock market results on TV say to yourself, "who cares? In a year anything that happens now will be a blip on the radar." If you know of a friend suffering from stock market fatigue, send them this email. |
