Another New Year has come and 2018 is in the history books. This is also a new chance for the stock market to move on from 2018 and do what it does best, go up! The end of 2018 was not good to equity markets and our investment portfolios.
Given I am an investment advisor does not make me immune to the frustration and pain felt when markets go down. We are all humans and logic cannot help us feel better when we see our hard-earned savings dropping in value. So, what do we do as investors? This scenario has happened before and will very likely happen again. Here is some reassurance for you when the headlines seem to be painting the picture in a different light:
- Patience: Market selloffs, pullbacks, bear markets, whatever you call them are never fun. Even better though, they’re never permanent. In fact, from the day we start earning income, and hopefully start investing, to the day we perish - may be a period of 70 years, if not more. That’s a long time to let the equity markets grow and compound our savings. For example, since 1926, the average bear market (decline in the markets) has been 1.4 years and the average bull market (advances in the markets) has been over 9 years. So, over the next 70 years, focus on the hill you are climbing, and not the yo-yo in your hand; which is the daily, weekly, or monthly market movements.
- Dividends: The period of time from 2000 to 2010 is often referred to as the “lost decade” for investors. Why is that? Well, the value of the S&P500 went down -12% over 10 years. Ouch! The silver lining during this time is that the overwhelming companies that make up the S&P500 pay investors dividends out of their profits. So, even if the value doesn’t increase, if you reinvested these dividends, your money actually grew by over 11%. Dividends do matter and buy shares for you when they’re on sale.
- It’s Never That Bad: Getting back to the news, well, let’s face it; fear sells. Tariffs, rising interest rates, government shutdowns; is it really that bad? Probably not, but right now it feels bad. From the 1960’s through the mid 1970’s the US was in bad shape. The Watergate scandal shocked the country, the Cuban Missile Crisis sparked a very near apocalyptic nuclear conflict, a barrel of oil went from $2 to $50 overnight, wages grew but the cost of groceries, housing and goods went up 3 times as fast, and the US auto market was about to be wiped out by the innovative Japanese. Phew…but you know what? We made it. The S&P500 went from 58 to 96 between 1960 and 1976 in some really bad times. But, a lots of good things happened too. More good things happened than bad. Just think, the S&P value today as I write this is 2,584. From 96 to 2,584 in 43 years.
I don’t know what 2019 will bring to the markets, nor does any economist, analyst, or day trader, but we have some certainties to calm our nerves. Life is guaranteed to be full of ups and downs, wins and losses, but there’s always light at the end of the tunnel. Wishing you a prosperous and rich 2019
The views expressed are not necessarily the opinion of Royal Alliance Associates, Inc. Due to volatility within the markets mentioned, opinions are subject to change without notice. All Investing involves risk including the potential loss of principal. No investment strategy including buy and hold and diversification can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary and therefore should only be relied upon when coordinated with individual professional advice. This information is not to be taken as investment advice or a guarantee of future results. Standard & Poor’s (S&P 500®) Index is a market capitalization-weighted Index of 500 common stocks chosen for market size, liquidity, and industry group representation to measure broad US equity performance. Investors cannot invest directly in an Index. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed, and the accuracy of the information should be independently verified.