The Stock Market Is Down; Now What?
Yup, the S&P 500 is down 23% as of June 17, 2022 from the value December 31, 2021. Footnote, this applies only if all your account is invested in the S&P 500. Many of you have seen your account decline by less. See Footnote (1) One question from an old-school risk tolerance questionnaire would ask:
“If your $100,000 investment portfolio goes does in value by $23,000, what would you do:
- Sell everything and wait until things get better?
- Sell some of my riskier investments and invest in more conservative investments?
- Do nothing?
- Start buying with any available cash?
What to do now? Do you absolutely need the money from your investment account in the next 12 to 18 months?
What are your priorities? Financial security? Obtaining a long-term return greater than inflation? Having enough money for your lifetime? Or maybe leaving a legacy for family or charity?
If your answers to the questions are: “No, I don’t need the money in the next year or so (or at least all of it).” “If the priorities are any of the items listed above” ….. then I will offer my opinion for consideration.
Do NOT start to sell everything or even large portions of your portfolio…(short of a few strategic / surgical sell and buy for tax reasons).
Sit tight with what you have. The investments were selected for a reason to fit in your financial plan to accomplish financial objectives. If your financial plan and the objectives have not changed, there is a good chance the investments should not be changed.
Short-term, yes, this is concerning. Seems like the country / world is falling apart. Global inflation, war in Ukraine, reoccurring COVID issues, supply chain, shortages of items like baby formula and female hygiene products and don’t get me started on the lack of cooperation in government to achieve a common / greater good (bunch of selfish, self-serving #%&*!)
“Why can I be so confident that it is not different this time?”
History. Yes, history. If you do your research (and stop watching the news and reading the internet) you will realize the S&P 500 makes a profit in eight of ten one-year periods; three-year rolling returns are positive 83% of the time; five-year rolling returns are positive 90% of the time; and on and on. The longer the time frame, the higher the probability of profits. (2)
Plan your cash flow. What will you need from your cash reserves in the next two or three years? To be safe, expand that perhaps a bit longer. Take NO RISK with the money you will need in the near-term.
Now comes the hard part, get that money out of the mattress and start to invest. Why? You may ask. Simple answer. If stocks (stock mutual funds or ETFs) were a good investment six months ago, they are now on sale at a 23% discount.
If you could buy a car, house, steak, or anything else you want now for 23% less than it cost six months ago, would you buy it? Now?
Heck yes. “But maybe it will be cheaper next week or next month? Should I wait hoping the market goes down more?” I don’t know. How cheap is cheap enough? The next blog will focus more on market cycles and performance.
I cannot answer those questions for you. In my opinion, this is an opportunity. How many opportunities have you missed in life? Perhaps it is time to put more money into action working for you. Just a thought. Please read the footnote from the Lazy Portfolio below with historic returns (just click on the link and it will take you to it).
Wollman Wealth Designs, Inc is a financial planning and investment advisory firm in Escondido, CA partnering with families, friends and clients in San Diego County and around the country. Please visit our website, call the office or send us an email with your comments or questions.
- The S&P 500 is an index. You cannot invest directly in the index. Past performance is not a guarantee of future results. Your portfolio results will differ from an index based upon the holdings in your account.
Securities and advisory services are offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker-dealer and registered investment adviser. Cetera is under separate ownership from any other name entity. CA Insurance License #0604093
"The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.