Cullen Roche, best selling author of “Pragmatic Capitalism: What Every Investor Needs to Know about Money and Finance” and founder of Orcam Financial Group, said it best in his tweet:
“The stock market is the only market where things go on sale and all the customers run out of the store.”
It’s so true!!!
The market plummeted, now what?
This happens! Every time the market goes down by a huge % I receive multiple publication requests asking what I’m doing differently with my client’s portfolios or what I plan to change. My answer is NOTHING!
Remember the big stock market crash in 2008? The stock market has actually gone up since 2009 and based on its history, a downturn is expected. Yes, I expect one and then another one after that. No, I’m not a psychic. However, my clients do not call me freaking out when there is a correction because they are prepared. Believe it or not, I actually feel better when we have a downturn because it’s normal and healthy. Also, some great moves can be made when one inevitably happens!
What DO we know?
Like I said, I don’t have a crystal ball and can’t predict the future, but based on history this is what we know:
The stock market will eventually go up higher than the record high of today
When stocks go down, it can continue to do so for a while
To grow real wealth, continue to save and invest so that you have funds in the stock market when another multi-year bull market occurs is key
Whatever you do, don’t get emotional and don’t try to time the market (like some people try to do, including my husband, hence why I have him on a stock market trading budget. I had to compromise for a happy marriage. Trust me, it’s a very, very small budget and he hasn’t beat my investment philosophy yet!)
It’s all about the long game
If you happen to be in a situation where you need money in 5 years or less for a house etc., it should not be in the stock market because of the stock market’s typical behavior. Most of my clients are in their 20s-50s, so any funds that are in the stock market are funds for retirement that they will not need for 10+ years. I don’t believe in trying to time the market. This is part of the stock market’s normal behavior. It goes up and then it goes down, and then it goes back up and then back down again and eventually those ups and downs average out to be much higher than when you started investing IF you hold for a long time.
See my favorite chart EVER – the stock market since 1900:
Source: FactSet, NBER, Robert Shiller, J.P. Morgan Asset Management.
So, why go through all this?
Because I want you to be a financial success story. If you know how to play, you take the risk, you ride the wave of volatility, then it pays, and it pays well based on history. If you can’t handle the risk, hire a financial planner you trust or buy CDs, bonds, or be in a money market account - keeping in mind that they haven’t paid as much as the stock market and if we’re thinking about retirement and you’re young that is NOT a good way to go. You will most likely end up having to save WAY more to be able to retire living the life you want.
Want to know exactly how much risk to take? I’m here to provide you with answers to your questions. It may all seem very overwhelming and confusing but, I promise, once you understand a couple of key components, winning at finances starts becoming really, really fun!
Now, put it into action
I want you to think of a stock market downturn as being “on-sale” and continue investing in your 401(k)s, Roth IRAs, etc. If you don’t need this money in less than 10 years, invest and just think of how much money you will have in the stock market at a GREAT price when it goes up again.
Again, I don’t have a crystal ball, but that’s my plan.
Are you surprised to hear that a stock market crash could actually benefit you? If you would like to start investing and have someone in your corner to help guide you through the stock market, schedule a free 30-minute call with me today.
