The thing to know from the start about investing in stocks is that there is always going to be a reason not to invest. There will always be some sort of economic/market/ or political event that, according to the media, is going to send the stock market crashing down. And when that “crisis” fails to destroy the market, the media does not move on to a blue skies and sunny forecast, they move right on to the next crisis.
Just in the past several years, we have seen all kinds of reasons to bail out of the stock market whether it was the COVID pandemic, 2020 Presidential election, overpriced stocks, inflation, the Russia-Ukraine war and so on. But the truth is, the stock market has rewarded those who have stayed invested. From the beginning of 2020 until April 1st, 2022, the S&P 500 is up about 40%. That is just over the last two years or so. If you are familiar with the bucket plan, we recommend keeping an even longer term perspective when investing in stock. If we look back over the last 10 years, from April 1st of 2012 to April 1st of 2022, the S&P 500 is up about 225%. There is no doubt we experienced some major volatility over those 10 years but it paid off to stay invested.
Here are a few keys to remain invested during stock market volatility:
- Understand declines are common. Every year the stock market is down at some point. But it has always recovered.
- Don’t try to time the market. Getting out of the market to reduce losses could mean losing out on gains when stocks recover.
- Keep your goals in mind. Money for short-term goals should not be invested in the stock market in the first place. Longer term goals are still years away, which allows the stock market time to recover.
I hope this has helped give you perspective on stock market volatility. As always, please feel free to reach out if you have any questions or concerns.