The stock market has had a tough last month. It’s currently down 4% over the last month and down about 9.8% from it’s recent high set at the end of July. That brings the year to date market gain down to +9%.
It’s been a pretty good year as far as index fund gains go. Yet still, I’ve heard from a few new investors this week that their investments have gone DOWN and they’re wondering if they should sell?! I ask when they need that money and the answer is usually decades away. So OF COURSE YOU SHOULDN’T SELL. Look at that 30 year chart. Can you spot a 4% drop 20 years ago? Even the great financial crisis doesn’t look so bad and that was YEARS of the market going down almost 60%. Would like to be able to buy at the PEAK price right before that crash? I SURE WOULD. The market is about triple that today.
And spoiler alert: The market will go up in the future. I don’t know what will happen the rest of this year or next year. But over the following decades the companies of the world continue to operate, innovate, grow, and profit. Those profits will be funneled back to shareholders and the total progress will be measured by share price and dividend payouts of your index funds. Buying and holding more and more of that is how you get rich.
So stop worrying about what happened the last week and a half. Focus on what’s a near certainty over the next few decades. Welcome market drops with open arms as they’re opportunities to acquire more shares at a discount. Don’t sell anything until you retire. That’s optimal investing.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
