A lot of you probably heard about the market downturn last week. In just over two days, the Dow Jones Industrial Average dropped over 1300 points or about 4.5%. The other major stock market indices didn’t do much better. Both the Nasdaq, S&P 500, Russell 2000 Index and others all got walloped last week. It was the worst drop in over 8 months and the worst week in almost 7 years.

Many people were calling last year’s losses the end of the long bull market. Donald Trump was blaming the Federal Reserve. There are a variety of reasons for last week’s market sell off.

Personally, I lost about $40,000 in my investments. Of course, the next day I gained almost $12,000 of that back because the market went up. I talked with a couple of other people who actually lost more. One friend of mine said she lost $100,000. Another said she lost $50,000.

Do I hate to lose money? Of course, I do. Am I worried? Not really.

I mean who likes to lose money? No one, but one of the reasons I lost a lot more than others is because the last 9 years has caused my investments to go up a lot more than say others. Moreover, my friends have more money saved and invested than I do, which explains why they lost what they did.

Six Reasons I am Not Worried About a Stock Market Fall

First, we are due for a pull back.

We currently have one of the longest bull markets in history. In fact, I believe we are in about the middle of a long-term secular bull market. That means, I believe, we have probably about another decade of good times in the market. But that doesn’t mean we won’t have another cyclical bear market (a drop of 20% or more). In fact, the average bear market is about 34% downward. On average, we are long overdue for a bear market. So if it comes it should be somewhat expected and that is ok.

Second, I am a long-term investor.

 I fully admit back in 2008 I thought about cashing out of the market. I was scared. I thought I was going to lose my job. But I stayed the course. I studied. I listened to others smarter than me. If I cashed out I wouldn’t have the ability to get the money back that I lost. I have since got that money back and then some. It was an important lesson for me and for others. Stay the course and most likely you will get your money back and then some in the long-term.

Third, I am in the wealth accumulation phase

While my desire is to be financially independent within the next 5-7 years (I think that is doable) I still hope to continue to work for a while. I have no desire to quit my career. Sometimes I think about being closer to home, but I have a lot of benefits that come with where I am at. Perhaps, in the future I may try to move closer to my home state, but I might stay at my current institution or find another one. The point is I don’t plan on stopping work anytime soon. I enjoy what I do and it invigorates with me. Along with that comes a salary. As long as I am making money I plan to contribute to my overall retirement savings. I won’t draw down on the money that I have saved for a while, which gives it time to grow and recover from any losses.

Fourth, I didn’t necessarily lose any money.

Yes, I know that looks weird. But I technically don’t really lose money until I actually cash out. It is all on paper. So until I actually tangibly touch my investments, which most likely won’t be for a decade or more I haven’t really lost any thing until I do something with it. Now you could say the same thing about my gains. Technically, I haven’t really made anything until I actually do something with it. The bottom line is until I start to access that money and lock in those losses by cashing things out or moving money around my losses aren’t necessarily permanent.

Fifth, stock prices are on sale. 

In many respects, the market going down is a blessing. Because that means dollars that you invest now will allow you to buy more shares in the interim. That will make you more money down the road because you will be able to accumulate more wealth by putting money into the market, buying low on items, and then selling it for a higher price later on down the road. For a savvy investor, a downturn in the market is an opportunity to make even more money down the road.

Finally, the market has always recovered.

 Now I know some people might take a look at that statement and dispute it a bit. But try this experiment. Pick a date, any date on the S&P 500 (it is about 90 years old), and then plot a date 20 years out. There has NEVER been a loss in a 20 year period. EVER! Now does that mean it might be different in 20 years? Possibly. But I doubt it. If that is the case then the world has a much larger issue and we are all in trouble. I don’t believe that will happen.

I mean think about it. If you would have told a person in 1978 that over 40 years they would live in a nation with multiple terrorist attacks, double digit inflation, double digit interest rates, multiple bear markets (some over 40% drop), multiple wars, housing losses in the trillions of dollars, thousands of banks failing, etc what do you think that person would say what the stock market was like in 2018?

Most likely they would say it would be down. The average return during that time was 13.15%. Adjusted for inflation that rate was just under 10%. Even with all of the chaos of the American and global economy over the past 40 years, there has been an average 10% return. Will the next 40 years bring 10%? Maybe not, but I wouldn’t bet against it.

If you pay attention at all to what’s going on in the economy and/or the stock market you will probably hear about volatility and possibly more losses. In fact, you might here more about it, not because of the losses, but because of President Trump. Trump thinks the stock market success during his presidency as part of his approval measuring stick. If the market goes down, then his approval rating (at least economically) goes down. And that is dangerous for his re-election campaign and for his legacy.

In fact, he has been laying the blame for the market downturn at the feet of the Federal Reserve and not at his administration. I believe this is a small preview of the argumentation line he will take in the future if the economy and stock market goes lower. He won’t blame himself or his policies, but the policies of others.

That is another post for another time.

In the interim, I think you should stay the course. Keep saving and investing on a regular basis. Don’t watch the news. If you do that and wait for it to recover in 5, 10, and/or 20 years you will NOT regret it.

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