Don’t Panic!


In case you missed the news the Dow Jones Industrial average had is largest single day point drop today.            

While not its largest percentage drop it was still a hefty drop percentage wise at 4.6%, making it the largest single day percentage drop since 2011. This follows a 2.5% drop on Friday bringing the value of the stock market down more than 7% in two days!

When these market drops occur I will often have people ask me “how much did you lose in the market today.” I can honestly tell them I did not lose a penny, and neither did you as long as you did not act foolishly and just stuck to your long term plan. No one likes to see their investments go down 7% so quickly, but you cannot focus on that. The more you have the more it seems to hurt. If you have a million dollars invested in the stock market (which all my younger readers who follow their plans will have at some point) it can be quite concerning to see the value of your portfolio go down $70,000 in just a couple of days. I wish I can say it will get better right away, but I can’t. While I think this down turn is part of a short term correction that will only last a couple of weeks I have no way of knowing that for sure. It is an educated guess. This could be the start of the next Bear market (generally defined and a drop of over 20% from its high.) Even if this is not of the next Bear market one or more of those will come at some point in your life so be prepared. 

I can tell you that if you have been taking my advice and are investing for the long term things will get better eventually if you simply stick to your long term plan. You probably hear or read many of these adds that warn you of the next market crash and that you should buy their product (usually and annuity or gold) so that you don’t “lose 50% of your money” in the next crash. Then you hear all the horror stories of people that “lost” so much money as a result of crash in the great recession just nine years ago. While it is true the market did drop 50% from its high of 14,164.43 on October 9, 2007 to its low of 6,594.44 on March 5, 2009, it is also true that the only people that lost money were those that panicked and completely pulled out of the market. Those that persevered and did not panic have been rewarded handsomely. In just four years investors that road it out had regained all their value.  I usually recommend not investing in the market any money you know you need in the next 5-10 years. So if you follow that advice you can always ride out a 4 year slump. Form its low in March of 2009 to today the money that was left in the market (and the periodic additions people made at that time to their 401ks) has quadrupled in less than nine years.

So for those of you who are new to the market I know times like this can be scary, but take a deep breath. If you follow you plan and only put your long term investing in the stock market you can weather any storm, whether it is four weeks or four years. Don’t try and time the market. It is not about timing the market it is all about maximizing the time you are in the market. 

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