Worried About Your Portfolio?

Financial Planning In a Headline-Driven World

 

If you’ve been thinking a bit more about your portfolio amongst news headlines lately, you are not alone! Captivating news headlines and market volatility are normal but can drive a lot of “financial anxiety”.  Since the market made new all-time highs last year, many people have begun to wonder more about how a possible drop in the market could impact their finances.  Over that time, the market has managed to continue to “climb a wall of worry” as we have slowly but surely made progress in some key economic areas like inflation, unemployment, wage growth, and corporate earnings. 

 

In a recent episode of the Money Alchemist Podcast, we talked about the difference between “financial stress” and “financial anxiety”, with the difference being that money stress involves a stressor – a real problem, whereas money anxiety is a general worry about money (even if that worry is misplaced).  While some level of financial anxiety is normal and healthy, reflecting a drive to make sure that things are in order and in good shape, none of us want to spend life unnecessarily worried about our financial health.  It’s critical to have a financial plan in place that can account for a variety of markets, making sure you are comfortable with your level of risk.

 

Lately, we’ve been spending time revisiting financial plans and running the numbers for clients to make sure we’re not leaving their plans to chance and that they can confidently stay invested over time.  While it can be tempting to try to time markets, the most successful investors tend to stay invested, making sure a down market doesn’t lead to financial problems.

 

Consider these statistics about long-term investing:

 

 

 

From 2000 through the end of 2024, 100k invested in the S&P500 has turned into over 638k, nearly an 8% annual return, even considering the internet bubble and 2008 crisis. Missing just the best 10 days over that period would have reduced the final balance to roughly 293k.

 

 

 

Moreover, those best days don’t tend to come during “fun times” to be invested.  Take a look at the 40 best days for the stock market from 1999-mid 2024 below.  You’ll notice that a lot of the dates fall in 2002, 2008, and 2020.  While those time periods were the toughest times to stay invested, they were also the most important moments to stick with it.  

 

 

The good news is that statistically, new highs are actually a good sign for the future of markets.  Consider the image below, which shows the returns for stocks for various time periods after a new market all-time high.  You may notice that on a 3-month basis, it tends to be worse on average to invest at a new high vs any day, but any other timeframe shows that investing at a new high historically has shown better forward returns for years to come. 

 

 

All of that said, market volatility is normal in the short-term, but rarely do we see prolonged periods of loss.  The average intra-year market drawdown over the last 45 years was over 14%, but the market was positive for the year as a whole in 34/45 years.  Even with 2024 being as good of a year as it was for the stock market, we still saw multiple drawdowns with an 8% drawdown at worst.

 

We want you to have confidence in your financial future. Don’t hesitate to reach out if you have questions or worries—we are here to help!

 

 

 

Thanks For Reading! We Hope To See You Again!

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Advisory services offered through National Wealth Management Group, LLC, a Registered Investment Adviser. This information is intended for educational purposes and is not intended as a recommendation to buy or sell securities. Investing involves risk. Before investing, you should consult with a financial advisor to determine how a specific investment strategy fits your personal goals and objectives.