WRITTEN BY: Gideon Drucker, CFP® AIF® ECA
I’ve been working from Montauk Beach 🏖️ for the past few weeks….
And mostly because my brother-in-law convinced me that it would be “easy”, I went out surfing (if you count lying on top of your board hoping not to get smacked by a wave…” surfing”).🏄♂️
Suffice to say, I am not leaving the world of financial planning to go on the world surfing tour.
Anyway, I wanted to share a quick story/update that’s been bouncing around my brain for a while…🤔
Last month, I had a client reach out with the news that they were about to receive their Q2 bonus and so had additional cash flow. She followed that by mentioning that all of her accounts have done well/made money, so naturally she’s looking to put MORE money to work ASAP so that it too can grow 💰….the implication being that as soon as she puts more money into their investment accounts, like clockwork, they will start making more money!!
And while it did make sense to get that money invested for her…I’m not going to lie…her rationale/thinking freaked me out! And my immediate thought was “Well, yes…but the markets can just as easily go down!”
And then I thought about it some more and realized why their phrasing was so scary to me…and why this thinking has become so commonplace among so many people! For most of us that have only been investing diligently over the last 10-12 years (or less), our expectations of “the market’ are (understandably) totally out of whack!
We are living through an extravagant bull market…
U.S. Stocks have returned over 600% since March of 2009. And over the last few years especially, it seems like every time you look at your accounts, you’ve made more money! 📈
Despite Covid, it’s been a fun 2 years to pull up your statements! And so it’s natural to get comfortable & to start thinking that the market only trends one way!
But, honestly, this type of thinking is dangerous…
My worry as the market has continued to climb is that when the “fall” does occur, we will all be shocked/devastated & feel like the carpet was ripped from under us. And so, I view it as part of my job to constantly remind you of the following:
IT’S TOTALLY NORMAL FOR THE STOCK MARKET TO LOSE MONEY. 💸
In fact, course corrections and volatility in the stock markets are a good thing…short term uncertainty is the price we all pay for the sort of long term gains that we can count on!
So what am I saying? Your INVESTMENTS accounts will go down soon…I don’t know if it’s in 6 days or 6 months but a downturn is coming! And that’s ok…it’s normal.
Think about this:
On average, the stock market:
- Drops 10% every 18 months
- Drops 20% every 7 years
- 1 out of every 5 years in the stock market loses money
We know this is going to happen…BUT even better…YOU are prepared & ready for when it does!
It’s why we’ve separated your assets into our 3 Bucket Program (Now, Soon, Later) and it’s why you’ve kept your Now Bucket accessible in your checking/saving accounts...
It’s why we keep at least 6 months’ worth of living expenses in your cash cushion/emergency fund…and its why we set up monthly additions to your investment portfolios (so that you can dollar cost average into your accounts…taking advantage of market volatility.)
Not one of you will be forced to sell any of your investments during the next market correction because you have built for yourself the time horizon to ride out these downturns and let the power of time and compound interest do its thing! 🏦
Because here are the only stats that truly matter:
- The Stock market has returned over 2,000% over the last 30 years.
- Every Single 20 year period in the stock market’s history has had positive returns
- Over the last 100 years, stocks have averaged 10% annual returns
Keep this in mind, the next time the market dips: the secret ingredient to investing is time ⏱️. As multi-decade investors, the only way that we can lose money over long periods of time is by voluntarily selling during uncertain times.
And as your financial partner, we will do everything we can to keep you from doing this & veering off course.
I’ll leave you with this…
I have absolutely no idea which direction the next 20% move in the markets will be, but I am absolutely confident of which direction the next 100% move will be. And that is all we care about.
If you have any questions or just want to set up a time to connect next chat… click here!