Investing can be scary especially during scary times
The past two years have been the most terrifying years for investors since the Global Financial Crisis of 2008-2009. First the pandemic, next a bitterly partisan presidential election and most recently a 40 year high inflation spike. You wouldn't be human if you haven't experienced market volatility fatigue and exhaustion at some point. I know I have.
You might also not be human if after two years of this chaos you didn't want to ditch your financial plan and move all your investments to cash for "safety" and to get some rest from the constant volatility.
You're exhausted and so is the financial advisor sending you this blog. But exhaustion isn't an investment policy nor can we craft a long term-goal focused plan on it. Getting out of the market to make the anxiety stop is an impulse decision, not a plan.
Let's think through this together
First let's understand that Russia's invasion of Ukraine is totally unrelated to the pandemic, the election and inflation. Although they may affect us the same mentally, objectively speaking they are unrelated.
Next let's accept that we have no idea how this situation is going to evolve or be resolved. No one does. So in order to make sense of this we need to harness some rationality under uncertainty.
As I write this blog the S&P 500 index which represents the 500 most successful companies in the United States stands at 4,500 which is about 6% below its all time high in early January 2022.
Since we can't predict the future, let's look at the past for other terrifying events that we have lived through and what we can learn from those experiences. The events that come to mind are Black Monday (the 1987 stock market crash), 9/11, the Global Financial Crisis of 2008-2009 and the Covid-19 Pandemic.
- The 1987 Crash—the largest one-day decline in stock prices ever—took place on Monday, October 19, 1987. The S&P 500 closed the previous Friday at 283.
- On the night before the terrorist atrocities of September 11, 2001, the Index closed at 1,093.
- It closed at 1,252 on the Friday before the Lehman Brothers bankruptcy filing in September 2008 setting off the Global Financial Crisis.
- Finally, the Index closed at 3,386 on February 19, 2020, just as the world was shutting down amid the pandemic.
We survived all of these "end of the world as we know it" events. Not only did we survive them, we thrived in them and past them. In short, life went on and the economy healed as did the markets.
Is this Russia/Ukraine war greater than or less than or equal to any of those events? We don't know yet. Time will tell us that answer. Therefore it's easy to feel that this time it's different. This time we will never recover. Our feelings can cause us to make emotional decisions with our investments. Decisions we may never recover from if followed through with.
Today's crisis inevitably becomes yesterday's news.
It all comes down to acting vs. reacting. Keep your head down and continue to act on your plan, looking neither to the right nor to the left. Remember history and not headlines. This is a great time to be an investor for the long haul even if it feels otherwise.
The more you know about past crises and how the great companies in America ran right through them and went on to new heights, the more you may realize that “This too shall pass.”
Remember always that it's not a market of stocks. It's a market of companies.
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Thanks for reading!
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