The stock market declines one day and then increases the next. Feels a bit jarring, right? What’s really happening?
First things first: this is expected.
We have been expecting volatility and these kinds of extreme swings in the market for a while. The recent and almost continual increase in the stock market is unprecedented. What is normal? Some volatility. Sudden increases and decreases are a healthy part of market cycles. Need some perspective? Here are a few reference points for market ups and downs from the not-too-distant past.
For the immediate time being, here are five things for you to remember:
- Your portfolio is about you. If you are invested with us, your account is not invested directly in the S&P 500. It’s diversified and invested based on your personal risk score. Therefore, your account will not directly mirror the recent up and down swings in the S&P. Don’t hesitate to reach out and make an appointment with us to discuss your individual accounts. Schedule time with either one of us: René or Diane.
- Now is not the time to sell. Trying to time the market creates a precarious situation. None of us has a crystal ball: we have no idea when stocks will decline or increase in value. What we do know is that it’s difficult to watch such large and wild swings in the stock market—and the 24-hour cable news cycle makes it worse. It’s human nature to lose patience and want to sell at or near the bottom of a downturn. Even if you were able to get out early in a decline, you would still have to guess when to get back into the market. And studies have shown you would likely guess wrong. In the short term, take a break from the stock market numbers and read or listen to other global economic news.
- You have not realized any losses yet. It’s normal to feel uncomfortable when the market is down, especially if you’re approaching retirement. However, each time in history that the market has gone down, it has come back up again. Average downturns of 10% are likely to return to normal within about 115 days, based on historical data. What happens if you sell now and the market is down? Then you have realized and locked in your losses, if you have any.
- Stay focused on the long term. Building wealth takes time. There are no short cuts. If you are our client, we’ve helped you build a financial plan and investment strategy for the long term, with short-term volatility in mind. Your plan is designed to meet the needs, goals, and dreams of you and your family. While a market correction can be upsetting, there’s no reason to deviate from your long-term financial plan.
- Call if you have questions. Please reach out. There are no dumb questions. Our goal is to help you successfully live your dreams. Bumps in the road are to be expected. Let’s chat. And if you or someone you know is not working with us, please feel free to make an appointment or to be a referral source. We’re here to help. Get us on your calendar — it’s easy.