The stock market is continually going through ups and downs, and crashes and cycles, as it has done for more than 200 years.
As you know, our firm focuses a lot of attention on protecting your savings as you near retirement. But for some of our clients (depending on their unique circumstances), part of their portfolio—and/or part of their 401(k) or other retirement funds—are still subject to stock market risk. The reason for this is that based on historic return data, the stock market can offer the highest returns over time, and so might still be part of your overall retirement plan design.
The Stock Market Is a Long-Term Strategy
Some of our clients are all set with their retirement income plan, so their concerns are not for themselves. They are worried about their children and grandchildren, and how stock market drops might hurt their loved ones’ finances.
We would like to remind everyone that it’s helpful to look backward.
The first market crash happened in Europe in 1634, when Dutch tulips bottomed out. (There’s a period movie called “Tulip Fever” that dramatized this one.) In the United States, the first major crash (and worst so far) happened in 1929. It took America 12 years to recover from the “Great Depression,” but we did recover, and went on to enjoy some of the greatest prosperity in our history.
But we’ve weathered more recent stock market collapses, too. Like the one in 1987 when “Black Monday” brought the largest single-day market loss in U.S. history. And there was the Dot.com bust of 1999-2000. The “Great Recession” of 2008.
The thing is, historically every eight years or so we have experienced some sort of market correction or crash. We were well overdue for the 2020 coronavirus pandemic and its effects on markets; it was 12 years of experiencing primarily nothing but bull markets since 2008.
We view the stock market as just one of the tools in your financial planning arsenal—the tool with the longest timeline. To quote Warren Buffett: “The stock market is a device for transferring money from the impatient to the patient.”
In other words, although no one can predict the future, based on historic market performance your children and grandchildren probably have time to recover, and most likely, prosper. (This might even be a good time for them to pick up some bargains, depending on their circumstances.)
For you, if you do not have a retirement plan in place to help balance growth plus protection of your assets in volatile times, please call us. There are options to investing in the market.
