QUESTION: I told myself I would focus on getting my financial life in order, and now it looks like the stock market is falling apart. Have I just picked the wrong time? Better to wait until later?
It’s August in Louisiana, and for most of us that means hot weather and dry, crispy brown grass. It seems as if the sky has forgotten how to rain; and if it does rain, it only lasts for a loud, thunder pounding moment, followed by more steamy humidity.
So what happens if you plan a day of Saturday yard work and walk outside, only to find out it’s pouring down rain. Obviously, you’ve got a couple of choices…
You can throw your hands up and plop down in front of the TV for an afternoon of Saturday in August daytime TV (and speaking of intellectual wastelands…).
Or you could shift your attention to the inside of the house. Surely there are some long-put-off projects that need tending to on a rainy day. I’m betting you can keep yourself both busy and productive…and dry…working on inside projects for as long as it rains.
I’m writing this column on the second of two pretty ugly days in the stock market. What’s going on here? China this, global slowdown that. Will the Fed raise interest rates before Labor Day…and if they do, can I still wear white afterwards? No one can say for sure what the exact cause of this latest market tantrum is, but anyone can see it’s raining outside.
So what do you do if you want to be a financially responsible person, providing for your future and the outside world just seems not to be cooperating? It’s raining outside, dang it! Here are a few thoughts for you:
Give up on fairy tales. Have you ever seen one of those dieting ads that says, “Eat what you want and lose weight!” They are all over the place. And the ads work (even if the all-you-can-eat diets don’t) because human beings always want to believe that they can somehow gain the rewards of effort for no effort. Something for nothing.
So about this time in the market cycles, I get a lot of comments about how “I’m just going to keep my money in cash until a better time.” I heard that in 2008 and 2009. Since 2009, the market has returned about 20% per year – but only for those few brave souls willing to dive in when every talking head on TV was screaming “global financial melt-down!”
Do you want the rewards that only the financial markets can deliver? Then you’ve got to be in those markets as a participant, not on the sidelines, hoping for a better day.
Get perspective. We want what the markets give (attractive returns over time), we just don’t like the package it comes in.
I often counsel clients to expect the following over 10 years of investing in the stock market: expect 3 really good years, 2 really bad years and 5 just kinda ho-hum years. This advice isn’t based on a scientific back-testing of every possible market movement over the past 70 years. It’s simply a healthy expectation to have, knowing there will be many years of market participation when you’ll say to yourself, “This isn’t much fun!”
Stock market gains tend to come in clumps – miss a few days and you might miss much of the forward advance you were hoping to get in the market.
Get your plan right. Make sure your plan is right, even if markets seem wrong. How are your insurance, savings, tax, retirement and estate plans going? Have you reviewed any of this lately? This is part of the “inside work” you can be doing while it seems to be raining outside.
Give it time. Yeah, you didn’t want to hear that either, did you? But there is really no other advice that gets at the root of your pain. You don’t want to markets to behave like this…because you are human…and humans (usually) dislike uncertainty and unpredictability.
I don’t know if we are headed into a minor correction or a major bear market…or neither! I do know I have been through two earth shaking bear markets (well three, but I was 14 during that one…), and I can tell you – only the patient survive.
If the rain keep up, is there some inside work you need to do?
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Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at email@example.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.