Stop Worrying About the Stock Market Plunge
The stock market is cooling off from the highs of the year. And that’s okay! Really. There are many reasons for this , but as a result, if you didn’t retire yesterday or plan to retire soon, you can more or less ignore the hesitation. (If you’re nearing retirement, read this article to find out what to do with your investment.)
Stocks (also known as stocks) have historically rallied. Yes, they sometimes went far down, but the general trend is upward. The daily readings don’t really matter much and you will go crazy following them. So, the best thing to do is to keep your money invested and move on with your life. If you have a long-term plan that can be very simple, like “I’ll be paying X percent of my paycheck before retirement, mostly in stock,” then you’re fine. It shouldn’t make you deviate from it. This correction is normal and completely normal.
“It’s impossible to get returns similar to that of the stock market (historically average annual growth of about 9.5%) without volatility,” writes the investment platform Ellevest . “In other words, making a profit without risk is just not a thing.”
You can also see this, as Adam Grossman points out in the Humble Dollar , as a reminder of the importance of diversification (note that this post was published on Sunday, so percentages may be a little inaccurate):
Consider the dynamics of some of the most popular stocks in the market this year: Apple is down nearly 26 percent since early October, Facebook is down more than 39 percent since the summer, and chipmaker NVIDIA is down 50 percent from its high. No one can predict where the market will go next, but you can definitely reduce your risk by making sure you don’t over-invest in any one investment.
You may have heard that it is still true that the stock market is not an economy. Stocks may be doing well and others may be doing well. In fact, this has been more or less true in the past few years. This is one reason why the president’s boastful tweets when the stock market was doing well at the start of the year seemed so hollow. Stocks may have gone up, but wages haven’t changed, no one can afford medical care, etc. (This is also because the market has nothing to do with one president ‘s long-term politics . But that’s a topic for another day. ..) Likewise, a few days of recession does not necessarily mean that a recession is imminent.
Jonathan Clements had a sensible approach to The Frugal Dollar : in principle, this is not a big deal compared to all the other bad financial decisions we make every day and which cost most of us significantly more (again, this was published in the last week when things were darker):
- Homeowners who closed the sale of their home could lose up to six percent of their revenue due to real estate sales commissions.
- Car buyers who purchased their new vehicle likely waived more than 10 percent of the purchase price by simply driving out of the dealership.
- Those who signed a separation agreement with their future spouse most likely gave up 50 percent.
- Investors who bought download funds could lose 5.75%.
- Employees who receive a salary, were fined a 7.65 percent tax on wages , perhaps 12 percent of the federal income tax and possibly 3 percent tax on state income.
- Those who then spent their salaries could lose another five percent due to sales taxes. And if they spent $ 100 in off-chain ATM cash, they could lose another $ 3 in bank charges, or three percent.
Oh yeah, the S&P 500 also fell 1.82 percent. Thank God for the small losses.
A little perspective never hurts.