By |Published On: Dec 14, 2021|Categories: Financial Planning|

Markets are Strong

2021 has been a great year for the stock market. Some consider it froth, speculation, or a new form of gambling. Sadly, it won’t increase in value every year.

At some point in the future, the stock market will go down. I don’t know when, I don’t know why, and I don’t know the amount of the decline. I do know that it will be scary.

When the stock market does decline, what are you going to do? The understandable but poor choice is to sell. The uncomfortable but wise choice is to stay invested, and the best choice is to invest more money.

Do You Like Pizza?

For example, suppose that you like eating pizza that usually costs $10 a pie. All of a sudden, one day, your favorite pie costs $7. Instantaneously, you can get a lot more pizza for your money. The same principle applies with stocks. You can buy quality companies at cheaper prices and get a lot more for your money.

Our personal histories often repeat. If you sold during the last stock market correction, you are likely to sell in the next. This is where I can help by working with you to stick with your investment plan – and maybe even invest more – during the scariest of markets.

The desire to sell is understandable. Doing so seems like it will make the pain stop. But if you did not know the correction was coming, how will you know when to get back in before the market takes off? One of my Dad’s friends is very proud that he sold everything in early 2008 before the market tanked from the housing crisis. The problem is that he never got back in. I don’t have the heart to tell him that by saving himself the gut wrenching 38% loss in 2008, he has cost himself hundreds of percentages of return.

Your mind is a suggestion machine. Every thought you have is a suggestion, not an order. Sometimes your mind suggests that you are scared and should sell your entire portfolio. However, if you pause and think, you can discover new suggestions. For instance, you will feel good when you stay the course and your portfolio rebounds.

You wonder, when will the stock market decline? Your guess is as good as mine. Don’t let the fortune tellers tell you when it’s going to happen either. They predicted the market downturn in 2019, 2020, and 2021. The market returns for those time periods are 31%, 18%, and 26% (2021 year to date), respectively.

When the stock market corrects, do you have a plan for how you are going to react?

If you’d like to talk about the markets, pizza, or anything else, feel free to set up a complimentary consultation.