Should You Be Worried About the Stock Market?
Volatility is back...
Monday certainly made you feel something as an investor. All the major US stock indices finished well into the red, the Nasdaq 100 had one of its biggest opening drops in more than four years, and Japan’s stock market (Nikkei) had its worst stock market crash since 1987.
Whenever a day in the stock market is being compared to the Black Monday crash in 1987, you may have reason to panic.
But should you?
As Michael Batnick put it:
The stock market hit an all-time high last month. The rally was broadening out, and economic data and inflation were cooling, giving the Fed the green light to begin its long-anticipated cutting cycle. The VIX was low, and credit spreads were tight. And then boom, a powder keg of risk exploded out of nowhere.
We had talking heads on TV hinting that things were too good. I mean, the S&P 500 went nearly 18 months without a 2% decline, who wouldn’t take that?
But now we’ve had a few 2% declines in a matter of two weeks.
Reason to panic?
Not really…
To be clear, it’s ok to feel something when the market drops dramatically, but panicking is not a strategy.
Remember this chart:
And this one…
Each year, on average, we see the S&P 500 pullback around 14% during the year. Right now we are in the midst of a roughly 9% pullback.
Friendly reminder to those not keeping track at home, the S&P 500 is still up around 10% this year.
Not to mention bonds are finally acting like bonds again:
As a financial advisor, arguably my number one job is to be a behavioral coach, oftentimes talking people off the ledge (not literally thank god...)
If I can help you avoid panic—one of the greatest obstacles to long-term investment success—and keep you disciplined and focused on your goals, then I've done my job.
As an individual investor, it's important to recognize the advantage you hold over financial institutions and hedge funds.
While they are under constant pressure to deliver short-term results to satisfy clients or meet quarterly targets, we have the freedom to drown out a lot of noise and focus on our long-term goals.
Our strategy is designed to measure progress over years and decades, not months, allowing us to be patient and avoid making short-sighted decisions.
After all, we are all working towards the ultimate goal —achieving financial freedom.
Next time you want to sell your stocks to go to more conservative investments, pull out a copy of this book, “Shut up and wait”:
**I know this is from 2017 but that green line has continued its upward trend 😊**
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly.
All investing includes risks, including fluctuating prices and loss of principal.