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Don’t Let a Declining Stock Market Lead to A Down Life

4th January 2019

Big red arrows, panicked cable news experts, and the echo chambers of our social media feeds can make stock market volatility seem much worse than it actually is. 

If you’re having trouble keeping a cool head about your own investments, take a deep breath and consider these three key points about market history and the true purpose of your financial plan. Today’s losses might seem scary, but if you can clear your head of all the noise and stay focused on what’s really important, your investments will yield a greater Return on Life. 

1. Stock market declines are normal and expected.

In March of 2009, the FTSE100 Index finally bottomed out after the banking crisis. Since then, investors have enjoyed a nine-year bull market, by some measures the longest ever.

You might suspect that after such historic growth, what goes up was bound to come down. And market history tells us that’s exactly the case. In fact, according to this US chart from Capital Research and Management Company about the Dow Jones Industrial Average (rather than specifically the FTSE100 Index), we’re slightly overdue for the decline the markets are experiencing right now. 

Stockmarket Declines


I'd point out that whilst some of the major stock markets might be somewhat down from their previous peaks, most of our clients are in well-diversified portfolios where the recent falls are noticeably less than those main stock market falls.

Recency bias convinces many people that this downturn is different, because our current social, political and geo-political environment is being amplified by non-stop cable news and twitter feeds. But think about some of the things that have happened since the beginning of this chart in 1948: Europe putting itself back together after World War II; the tumult of the 1960s Cold War; the OPEC fuel crisis in the 1970s; the Black Monday market crash in October 1987; the Gulf War; 9/11; natural disasters like Hurricane Katrina and the Indian Ocean Tsunami; the Lehman Bros. bankruptcy and subsequent banking crisis in 2008. 

Through all these events, and many more, the market experienced short-term declines. But viewed through a wider lens, the long-term trajectory of the stock market has continued to point upward, no matter what the world and panicky investors throw at it.

2. You’re planning for tomorrow, not today.

We’re working with you towards long-term goals, including a secure and rewarding retirement and a significant legacy that will benefit your family, friends, and community. 

The people who are most affected by today’s stock market numbers are people who make a living buying and selling stocks every day. These traders are operating on a timeframe that’s much narrower and much more volatile than the investments in your retirement portfolio.

Take the 1987 market crash as an example. Many day traders lost their shirts on Black Monday. But less than 2 years later, the FTSE100 Index (dividends reinvested) was back at its previous peak. 

Now, of course, that year or so would have been nervous times, especially for people who were nearing retirement. But viewed over the course of a typical 30-year retirement savings program, these kinds of normal market corrections are typically minor blips. 

3. Return on Investment is less important than Return on Life.  

Still, there’s more to your money and the investment strategies we’re working on together than just your ROI. 

Real meaning in life comes from focusing on all the things money can’t buy. If you spend your entire working life chasing after every last penny, then when you retire, money is all you’ll have. You won’t have a network of personal relationships to enjoy. You won’t have a connection to your community and local causes that improve it. You won’t have a personal routine that keeps you healthy, active, and engaged. You won’t have hobbies that put your skills and interests to their highest uses. You won’t have a spiritual or aesthetic center you can cultivate through art, nature, religion, or giving back. 

In retirement, you also won’t have that next penny to chase anymore because … you’re retired! What are you going to do with all your new free time?

Fretting about normal market volatility only leads to bad financial decisions and a distorted view of what your money is really for. We’ve found that the sooner folks start focusing on living the best life possible with the money they have, the greater their Return on Life is throughout the financial planning process. 

If you’re worried about how this latest market correction could affect your financial plan, contact us to arrange a meeting to discuss this. We’ll run through everything to make sure your plan is on track to deliver something more important than money: a happy, secure, and fulfilling life. 


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