There’s been a lot of concern about market volatility over the last few days. A lot of questions come up, such as:
“Are we going into a recession?”
“Joe, am I going to lose a ton of my money?”
“Should I put all of my money under my mattress?”
Well, I can’t answer the first question. The second one depends on how your portfolio is invested. Lastly, putting your money under a mattress is never a good idea.
Recession Fears
Market volatility, or the ups and downs of the stock market, have been worrying over the past few weeks and have heightened a lot over the last several days. Volatility is measured by the VIX index, but more on that later.
In addition, there has been a lot of talk about a recession, one of the most feared words in the English lexicon. Whether it happens or not, I don’t know. You should be wary of the experts and soothsayers who predict that we are going into a recession.
What you can do is prepare by investing your portfolio and adjusting your financial life so you are in a strong position, in the event that there is a recession.
We live in an unpredictable world. The best we can do is to prepare.
Money Decisions
When it comes to markets that have decreased in value, it’s not such a bad event. Think about if you like pizza. One day your favorite pizza shoppe sells their mushroom pizza for $10 a pie. Then one day, all of a sudden, the pizza is on sale for $7 a pie.
Would you be happy or sad? Probably happy! You can eat your favorite slices for a much lower price. Think about it as a good time to invest some more money into sound and quality investments.
If you don’t have any extra money at this time, that’s ok. Either way, it’s probably a good idea to review your investment portfolio with a CERTIFIED FINANCIAL PLANNER® professional.
Money Under the Mattress
It’s never a good idea to keep money under your mattress, in times of economic boom or during a feared recession, because inflation eats away at the value of your stashed money.
While it sits under your bed, the value of your money stays the same, but the cost of goods and services increases every year. According to the Bureau of Labor Statistics, inflation was 6.5% in 2022. During 2023, it was 3.4% and it was 2.9% last year.
If you kept money under your mattress over the past three years, you would have lost 13.3%. Continuing with our pizza example, the price of pizza would increase from $10 to $11.33. Would you rather pay $7 or $11.33 for your beloved mushroom pizza?
Also, at night you are really sleeping on top of your money and it’s stressful. It can’t be good for REM and deep sleep cycles.
If you’d like to chat about the economy, market volatility, or financial planning over some pizza, that would be awesome!