Minimizing long-term regret

Published 7:34 pm Tuesday, May 24, 2022

Over the past five months, those who are invested in the stock market have experienced some form of volatility; regardless of how conservative they have attempted to be.

Everywhere we look….our phones, TV, newspaper, radio we see terrifying propaganda that makes us fear for our financial future. Words like inflation, interest rates, war, sickness, labor shortages the list can go on and on.

Some of you who may be reading this have experienced more “down-markets” than I have personally. I believe it’s refreshing to look back, and take note of what history can teach us; even though the past will not indicate what will happen in the future. As Warren Buffet said, “If past history is all there was to the game of investing, the richest people would be librarians.”

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In 2008, our country experienced a housing crisis where banks handed out money to consumers who couldn’t afford to pay back the note. Since that period in 2008, the S&P 500 (an index made up of America’s strongest companies) has averaged an annual compounded return of 7.943%.

If we take a look from January of 2008 to the end of 2009 the S&P 500 lost 37.22 percent. Your one-million-dollar portfolio would be worth 630k in a two-year span … that doesn’t feel good. Most people when this happened made the mistake of selling their portfolios and going to a safer asset class — cash, bonds, cds, etc.

If that particular investor would have maintained discipline and patience and did not sell during the bear market that 630k portfolio today would be worth 1.8 MM dollars roughly as I write this.

My thoughts and advice moving forward are to stay the course and stick to your financial plan. If you do not have a plan in place, find someone who is experienced in building out a financial plan, and can help develop strategies that are specific to your situation.

If you are currently working with an advisor, make sure you are leaning on them during these times of volatility and that your plan is on track. Ignore the white noise and stay resilient because the market will be.

“In bear markets, stocks return to their rightful owners” — J.P. Morgan