No one can predict the future of your investments, but one thing we can count on: another big drop is coming. And the one after that. And the one after that one, too.
One of the truths that every successful investor must face is that – despite all efforts to understand the economy, minimize risk, follow micro- & macro-economic trends, and choose only well-researched & vetted holdings – the stock market will drop. It will fall more suddenly and steeply, receive more attention from the media, and feel more significant than it does while slowly moving higher.
It is important to remember when those drops inevitably happen, that this is normal. It is an uncomfortable, anxiety-inducing part of the process, but stock market declines are not unusual. Since 1950, the US stock market has gone through 38 market corrections – declines of 10% or more from recent highs – roughly one every 22 months. Nine of those have been full-blown bear markets – declines of 20% or more.
And yet, over that period of time, the S&P 500 has returned almost 19,000% (adjusted for inflation). The Dow Jones Industrial Average has returned about 17,500% (adjusted for inflation) during the same years. Those huge, potentially life-changing returns include all 38 market corrections and nine bear markets, all the ups & downs, slow increases and dramatic drops.
When the next correction comes (and it will), remind yourself that this is normal. Not fun, not comfortable, but also not uncommon. It is part of the process of building and maintaining wealth. Accepting the inevitability of market sell-offs can reduce worry, increase confidence, and free up mental energy for more important pursuits.
Timothy Iseler, CFP®
Founder & Lead Advisor
Iseler Financial, LLC | Durham NC | (919) 666-7604
Iseler Financial helps creative professionals remove stress while taking control of their financial futures. As both advisor and accountability partner, we help identify current strengths and weaknesses, clarify and refine your long-term goals, and prioritize understandable, manageable, and repeatable actions to bring long-term financial well-being. Reach out today to take the first step.
Opmerkingen