What a rocky start to 2022.
The S&P 500 is well into correction territory and like many I'm sure you're worried about your investments.
But there's a saying I like that really helps keep things in perspective when the market is looking rough.
In fact for people who reminded themselves of this in prior corrections, they've most likely made back their loses, and some nice returns as well.
That saying is "Buy Low, Sell High".
The saying isn't "Buy High, Sell Low"
I'm sure you've heard the saying - Buy Low, Sell High.
Yet if the market drops and your investments plummet over a few short weeks you may be feeling the urge to do just the opposite.
When you watch your investments fall week by week, down -10%, then -20%, then maybe even 30%.
It's excruciating to watch and it feels like it will never end. The instinct to "get out before it falls further" is only natural.
But history has shown this is the wrong approach. Because if you weren't able to predict the day the market started its course downwards, it's unlikely you'll know when it will swing the other way.
And missing those first few days upward could be crucial.
"How big of a difference could it make?", you may be wondering.
Consider this...
Over the 20 years between 1999 to 2019 the S&P 500 averaged a 6.06% annual return.
But if you missed only the 10 best performing days in that same period your average annual return would have been just 2.43%.
That's 10 DAYS, out of 20 YEARS. That's a difference of 3.63%. EVERY. SINGLE. YEAR. For missing just 10 days!!
So unless you have a time machine your approach should likely be to just sit and wait it out.
The saying is "Buy Low, Sell High"
I know I'm repeating myself here but I like to think of this as a sort of mantra.
Stocks are going down? Feeling nervous? What was that saying again? Oh yeah, Buy Low Sell High.
Let me ask you a question.
When Covid19 first started the market dropped a ton.
When that happened how much buying were you doing?
Now I'm not suggesting to move ALL your savings into the stock market any time there's a downturn.
Everyone's situation is different and you want to plan accordingly.
But if there's a recession and you're still working for example, it could be a great time to look at increasing your 401k contributions.
Or if you have any Rollover IRAs that you haven't done much with, you could consider starting a monthly contribution to those as well.
A monthly contribution during a down market can be helpful because you won't know how long that downturn will last.
It may be as short as a few months or end up stretching out to a year or longer.
Putting in a bunch of money all at once, when there's a chance the market could continue to decline would probably not be enjoyable to watch.
But by planning to increase your monthly investment contributions over a period of time you can "Dollar Cost Average" your contributions and essentially purchase the average cost of the overall down market.
Or "bear market" as it's often called.
Obviously don't do more than you can afford to do, but keep that in mind for the next time we see the stock market take a big hit.
Don't panic, just remember the mantra.
And if you're not sure where to start or could use some help...
That's exactly why I'm offering free, no obligation strategy calls for anyone in the Pharmaceutical industry.
And before you come up with a million excuses of why you shouldn't:
-Yes it is free
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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. The information presented does not constitute a solicitation for the purchase or sale of any security and is not a recommendation of any kind. Please consult your financial advisor before making financial decisions. Dollar cost averaging does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels. The S&P 500 Index is unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future results. Investing involves risk, including the potential loss of principal.
(03/21)