The Greatest Chart Ever

In times of stock market weakness, similar to year-to-date in 2022, it is human to experience fear. Part of staying on course with a savings and investment plan takes into consideration that fear is part of life.

Most recently, a number of investors may be expecting – and would be wise to expect – a market pullback due to more than a decade of steady market gains. However, this realization does not necessarily lessen or eliminate fear. Here is where the “Greatest Chart Ever” offers needed perspective.* Over a period of more than 40 years of intra-year stock market performance, the chart illustrates valid reasons NOT to allow short-term market moves (monthly, quarterly – even yearly) to lead to poor investment decisions. Why? Please read on.

In the chart above:

  • the RED DOTS = how much the market went down at some point DURING each year 
  • the BLUE LINES = where the market FINISHED AT THE END OF THE YEAR.

For example, in 1987 when there was a stock market crash there was a period of time late in the year when the S&P 500 was down 34%. In that particular year, the S&P 500 index finished the year up only 5% including dividends.

In the financial crisis of 2007 to 2009, a particularly scary time for stocks, the chart illustrates that in 2008 the S&P 500 was down 47% at one point and finished down 37%. The following year of 2009 saw the S&P 500 down 28% at one point in the year and finishing UP 27%, an upside turnaround of over 55%.

This data of over 40 years points out that sticking with an investment plan can be CRITICAL to reaching financial goals. Making a rash investment change due to fear caused by an INTRA-YEAR decline can destroy a well laid out, long-term investment plan.

In my favorite “Gut-check in Rocky Markets” message, I remind clients and friends to keep three important things in mind:

1) your cash position,

2) the certainty of your job or income,

3) your trust and confidence in your financial adviser. 

If one of these things is faltering, then it could be time to make a change. If these three things are in place, then peace of mind can be possible amidst market turbulence. One critical item is keeping lines of communication open with your adviser. As always, please call me with any questions or comments – and I aim to call my clients before they need to call me! 

*Past performance is no guarantee of future results.

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