Big red arrows, panicked cable news experts, and the echo chambers of our social media feeds can make stock market volatility seem much worse than it actually is. 

When this happens, do you have trouble keeping a cool head about your own investments? If so, take a deep breath and consider these three key points about the market history and the true purpose of your financial plan. Although a loss today might seem scary, if you can clear your head of all the noise and stay focused on what’s really important, your investments can yield a greater Return on Life. 

Stock Market Declines are Normal and Expected

In March of 2009, the US markets finally bottomed out at the end of the Great Recession. Since then, investors have enjoyed a nine-year bull market, by some measures, the longest ever.

You might suspect that after such historic growth, what goes up will come down. And market history tells us that’s exactly the case. Just take a look at this chart from Capital Research and Management Company.


Recency bias convinces many people that current downturns are different because everything is now amplified by a 24-hour news cycle and social media. But think about some of the things that have happened since the beginning of this chart in 1948: 

  • Europe putting itself back together after World War II
  • The tumult of the 1960s, culminating in the Kennedy assassinations and Vietnam 
  • Gas shortages in the 1970s
  • Black Monday market crash in October 1987
  • Two major wars in the Middle East and countless other military engagements
  • 9/11
  • Natural disasters like Hurricane Katrina and the Indian Ocean Tsunami
  • Lehman Bros. bankruptcy and subsequent housing crisis in 2008

Through all these events, and many more, the market experienced short-term declines. But viewed through a wider lens, the long-term trajectory of the stock market has continued to point upward.

You’re Planning for Tomorrow, Not Today

You’re working toward long-term goals, including a confident and rewarding retirement and a legacy that will benefit your family, friends, and community. 

The people who are most affected by daily stock market numbers are people who make a living buying and selling stocks every day. These traders are operating on a timeframe that’s much narrower and much more volatile than the investments in your retirement portfolio.

Take the 1987 market crash as an example. Many day traders lost their shirts on Black Monday. But just 23 months later, the market was back at its previous breakeven point. 

Now, of course, those 23 months were nervous times, especially for folks who were nearing retirement. But viewed over the course of a typical 30-year retirement savings program, these kinds of normal market corrections are typically minor blips. 

No financial plan is totally immune to market fluctuations. But by diversifying your investments across stocks, bonds, and other financial vehicles, you’re unlikely to jeopardize your long-term plan over a single market event. Plus, if you with us, you’ll also have both long and short-term savings “buckets” depending on your age, goals, and how close to retirement you are. Once you retire, we take the bucket strategy to a whole new level that can really help you feel less anxious about your financial well-being.

This combination of diversified assets, the bucket strategy, and healthy savings gives you a sound plan. It also provides the flexibility to address potential problems or to take advantage of opportunities that might benefit your overall portfolio. 

Where you have the most direct control over your finances is your personal spending. If you’re retired, it’s always important that you spend within the boundaries of your annual withdrawal plan. Younger investors might consider increasing their planned savings contributions during a downturn, especially if you’re counting on that money for a home or auto purchase in the near future. 

In short: Sticking to your plan and living within your means are two of the best financial moves anyone can make during any market volatility.

Your Focus is Long-Term, Not Short-Term

It’s true that some market indicators are warning signs. For instance, when short-term interest rates hover near the same level as longer-term interest rates, economists begin to worry about the direction of the economy in the upcoming months. Or, when major stock market averages experience daily drops, while not unusual, it will still grab your attention. But there are positive economic indicators as well, including yearly gains in the market, low unemployment, job growth, and strong economic input. 

Investors who try to time their investments to these or any other economic signals are looking at market history through a dangerously narrow lens. The ultimate size of your nest egg won’t be determined by one week, one month, or even one year. True wealth is built up slowly, over decades of steadfast saving and investing, careful planning, and thoughtful rebalancing when necessary. 

So don’t let any short-term market worries impact the Return on Life you enjoy from all your hard work and planning. 

Return on Investment is Less Important Than Return on Life

Still, there’s more to your money and the investment strategies we’re working on together than just your ROI.

Real meaning in life comes from focusing on all the things money can’t buy. If you spend your entire working life chasing after the next dollar, then when you retire, money is all you’ll have. You won’t have a network of personal relationships to enjoy. You won’t have a connection to your community and local causes that improve it. You won’t have a personal routine that keeps you healthy, active and engaged. You won’t have hobbies that put your skills and interests to their highest uses. You won’t have a spiritual or aesthetic center you can cultivate through art, nature, religion, or giving back. 

In retirement, you also won’t have that next dollar to chase anymore because … you’re retired! What are you going to do with all your new free time?

Fretting about normal market volatility only leads to bad financial decisions and a distorted view of what your money is really for. We’ve found that the sooner folks start focusing on living the best life possible with the money they have, the greater their Return on Life is throughout the financial planning process. 

You Understand Your Relationship With Money

A big focus of our Life-Centered Planning exercises is to make folks more aware of what their relationship to money is really like. 

For instance, early on in our process, we use interactive tools and discussions to identify how comfortable a person is investing in the markets. Some people are highly skeptical and think “the game is rigged.” At the other extreme are people who have a gambler’s irrational confidence in investing and love “laying their money on the line.”

Most folks fall somewhere in the middle. But market volatility can rouse some bad tendencies at both ends of the scale. Market skeptics might pull out their investments and shift too much portfolio weight to cash, bonds, CDs, and other low-yield options that can cripple their long-term wealth-building. Gamblers might see “buy low” signs everywhere they look and get in over their heads. 

If you’re worried about how this latest market correction could affect your financial plan, click here to connect with us and let us help you get your money and your return on life on track.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All performance referenced is historical and is no guarantee of future results all indices are unmanaged and may not be invested in to directly.  All investing involves risk including loss of principal. No strategy assures success or protects against loss…

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