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Give Your Investments Time to Work. If Your Retirement Goal is 10 or 20 Years Away, Don’t Check Your Portfolio Three Times a Day.”
03/08/2023
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By Lars Olson, CFP®, ChSNC™, CPFA, CAP®, CRPS®
President, Wealth Advisor
Alluvial Private Wealth
This week was certainly difficult for stocks. However, I think it’s important to keep the longer-term perspective in mind. Over the last 50-years, a lot of ups and downs have occurred in the market, yet it’s the long-term results that can pay off.
This timeframe happens to coincide as I approach my 50th birthday. My interest in the market began at a young age. With my father’s work as a financial advisor, there was always talk around the house of the stock market and its results. Although young, I learned so much from the stories and experiences he shared. When hearing of the ups and downs that came with market fluctuations, he always emphasized the importance of keeping long term goals in mind. I clearly remember the stock market crashing in 1987 and other times we have weathered through in years since.
According to Yardeni Research[i], the stock market has experienced a 10% drop at least 28 times since 1970 - that’s a little more than one correction every two-years.
- Of these market drops – 21 were garden variety corrections of only 10-20%.
- Seven drops reached at least 20%, with the worst drop occurring with ‘the great financial crisis’ of 2008 when the market dropped by more than 56%.
- The longest bear market occurred from 2000-2003 and lasted 929 days (2½ years). This was the result of the bubble burst of the dot-com industry, 9/11 terrorist attacks and Enron & WorldCom accounting scandals.
- Two of the last five decades are considered lost decades as the stock market index began and ended at around the same level.
After reading this blog, you may think of stocks as a questionable investment with their potential volatility. However, with the end result in mind, you can really see significant results.
In 1971, the Down Jones Industrial Average was around 800. As I write this, the Dow has grown to 34,382 – that’s 43x higher than when I was born. That’s really good growth. But it doesn’t tell the whole story as investors have also received dividends over the years and that isn’t reflected in the 43x price performance.
What’s the point? Despite all the volatility in the short term, the stock market tends to do very well over the long term. Be willing to give your investments time to work. If your retirement goal is 10 or 20 years away, don’t check your portfolio three times a day.
[i] Yardeni Research, Inc., Market Briefing: S&P 500 Bull & Bear Markets & Corrections by Dr. Edward Yardeni, Joe Abbott and Mali Quintana, May 19, 2021 www.yardeni.com
President, Wealth Advisor
Alluvial Private Wealth
This week was certainly difficult for stocks. However, I think it’s important to keep the longer-term perspective in mind. Over the last 50-years, a lot of ups and downs have occurred in the market, yet it’s the long-term results that can pay off.
This timeframe happens to coincide as I approach my 50th birthday. My interest in the market began at a young age. With my father’s work as a financial advisor, there was always talk around the house of the stock market and its results. Although young, I learned so much from the stories and experiences he shared. When hearing of the ups and downs that came with market fluctuations, he always emphasized the importance of keeping long term goals in mind. I clearly remember the stock market crashing in 1987 and other times we have weathered through in years since.
According to Yardeni Research[i], the stock market has experienced a 10% drop at least 28 times since 1970 - that’s a little more than one correction every two-years.
- Of these market drops – 21 were garden variety corrections of only 10-20%.
- Seven drops reached at least 20%, with the worst drop occurring with ‘the great financial crisis’ of 2008 when the market dropped by more than 56%.
- The longest bear market occurred from 2000-2003 and lasted 929 days (2½ years). This was the result of the bubble burst of the dot-com industry, 9/11 terrorist attacks and Enron & WorldCom accounting scandals.
- Two of the last five decades are considered lost decades as the stock market index began and ended at around the same level.
After reading this blog, you may think of stocks as a questionable investment with their potential volatility. However, with the end result in mind, you can really see significant results.
In 1971, the Down Jones Industrial Average was around 800. As I write this, the Dow has grown to 34,382 – that’s 43x higher than when I was born. That’s really good growth. But it doesn’t tell the whole story as investors have also received dividends over the years and that isn’t reflected in the 43x price performance.
What’s the point? Despite all the volatility in the short term, the stock market tends to do very well over the long term. Be willing to give your investments time to work. If your retirement goal is 10 or 20 years away, don’t check your portfolio three times a day.
[i] Yardeni Research, Inc., Market Briefing: S&P 500 Bull & Bear Markets & Corrections by Dr. Edward Yardeni, Joe Abbott and Mali Quintana, May 19, 2021 www.yardeni.com
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