Spring, Market Swings, and Why I’m Still Optimistic
It’s spring, my favorite time of the year!
This spring, however, has been slightly marred by a rather speedy market correction.
In moments like these, I like to remember to focus on things I can control.
So… if you’re in need of a pep talk to get through this bit of volatility, this blog is for you!
And to refocus your energy on making progress in other areas of your financial plan, consider reading “5 Areas that Need Financial Spring Cleaning.” Even if your portfolio is taking a breather from growth, you can still progress forward towards a successful retirement.
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I am not fearless. However, I am definitely not a chicken.
I prefer to view myself as a calculated risk-taker. At amusements parks, I will ride any rollercoaster I can find. The height, speed, or number of loops does not deter me in the slightest, but you will NEVER find me riding a haphazardly constructed fair ride.
I also spent a summer as a high-ropes course instructor while in college. I climbed 50 feet into trees on metal pegs barely large enough to grip, dangled from wires over cliffs, and safely belayed hundreds of people. I confidently trusted my equipment with my life. Yet, almost ridiculously, I get shaky if I get close to a high overlook at a park.
I think the difference between what I fear and what I am confident in is my level of factual knowledge and experience.
I know that rollercoasters are thoroughly inspected and safely give thousands of rides, and I spent hours training with my ropes course equipment.
Knowledge and experience expel fear.
Not one person was hurt on my ropes course that summer. However, there were dozens of injuries elsewhere from kids tripping over rocks, getting bee stings, etc. Being on the scary, unfamiliar ropes course was really the safest place to be.
Similarly, I believe it is unfamiliarity that makes people fearful of the stock market.
Here’s Why I Don’t Fear the Markets:
I’m a long-term investor
Part of my job is helping clients invest. A bigger part of my job is bringing clients peace of mind and calm through the market’s ups and downs. We see giant, red, downward arrows on the news, emphasizing the smallest market declines, whose goals are to incite worry. Market declines do not phase me. Why?
Because over the long term, investing with a diversified portfolio is a proven way to grow assets.
As you can see below, there is no rolling 20-year period in the S&P 500 with a negative return between 1926-2018 (Murray 64).
If you invested with the S&P 500 and stayed invested for any 20-year period in that timeframe, you had next to zero risk of losing money! The market is unpredictable on a day-to-day basis, so day-traders should expect a tumultuous experience. However, based on history, people who invest in solid, diverse companies over the long term will make money. Over that same time period, investors could average growth of 10% per year (Murray 48).
Do not avoid the stock market because of fear! Continue educating yourself, talk to an advisor, and start building your financial legacy.
When volatility occurs, repeat to yourself, “I am a long-term investor!”
I fear something that’s even scarier
Why do I invest at all? I invest because I do not want to outlive my money.
Consider being 80 years old, unable to work, and forced to live only on small social security checks. Now that is scary.
We have already established that investing over the long term is a historically reliable way of making money. Over time, you can create a portfolio that will provide you with security and flexibility in retirement. Therefore, knowledge and experience show me that outliving my money is a more dangerous situation than investing in the stock market, using proven strategies.
I believe in innovation
I have confidence in mankind’s ability to innovate. It was not too long ago that reading required paper. Now, you can pick up your phone, tablet, or laptop to read whatever you want. Every generation thinks there are no unthought ideas left to be invented. Yet, every generation has their worldview changed when a new device completely alters the way we live.
Our knowledge of history tells us that the world consistently drives towards productivity, wealth creation, and improved quality of life. To be human is to create. As long as the human spirit remains intact, products and services will be created, companies will form and grow, and owning those companies will prosper you.
If you still find yourself hesitant to invest in stocks, sit down and think about what is stopping you.
If it is unfamiliar, there are great resources available to help you gain knowledge and understanding. One resource I found helpful was Nick Murray’s book, Simple Wealth, Inevitable Wealth. He speaks to the power of long-term equity investing clearly and sure to make you laugh.
In addition, a financial advisor can help you choose the right stocks that best meet your goals and tolerance for market volatility. With your new knowledge and an advisor’s experience, the stock market might not seem so scary after all!
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How about your financial life this spring?
This is a great time to complete some financial spring cleaning! Get your financial life in order so you can enjoy the nice weather ahead and have peace of mind.
I recommend the following:
- Get That Filing Cabinet Organized!
- Make Sure Your Estate Plan Is in Order
- Get Your Bills on Autopay!
- Make Sure Your Insurance Policies Aren’t Out-of-Date
- Plan to Rebalance Your Portfolio
Read more here.
