2020 was a crazy year. Challenges so unique they were surreal. Massive room for efficiencies, the ability to show vulnerabilities and share common experiences - grief, fear, doubt, reminders that tomorrow is never promised and endless opportunities to seek seeing the good. While we understand a change in calendar year is not magic, we can be proud that we grew, we adapted, we improvised and overcame. Even though obstacles remain, I am a firm believer in silver linings and while there is a lot, both good and bad, that stood out last year, doing our best to keep a positive attitude alongside staying the course is a pattern that remains prudent.
Behaviorally, it is so common for our emotions to override logic. However, when it comes to investing, we often make the wrong moves, forgetting you must be right twice. When to get out and when to get back in. When the stock markets are up, it is easy to feel like you do not want to miss out on the excitement, fun conversations about the rise in share price, and what it can feel like to potentially win big. What we forget, is when markets are low, that means things are on sale – you buy more for less. Not intuitive to a normal investor because that is also when investing feels the scariest. Funny, given that in most other industries, we wait for a sale. Why? Likely because it is more predictable. Would you buy a $200 dollar pair of jeans at full price, if you knew a week later, those same jeans would be 25% off? Probably not.
It is also incredibly natural to get sucked into the financial news, follow it religiously, start to feel like a bit of an expert - and when you win, equate that to skill rather than luck. If you have money to play with, speculation can be fun. However, at Retirement Wellness Group, we focus on working people who eventually want to work less and enjoy their version of retirement. That may mean, there is no space for speculative investing. It is about putting away as much as you can, increasing your contribution rates to get as close to that IRS max of $19,500 plus $6,500 (50+) as possible, year after year until you have finally accumulated enough to pivot away from the career you have now, into a new adventure – paid or unpaid. Something well thought out and a journey that brings you purpose, fulfillment and dignity. This can be harder to do if you are tinkering with your retirement account.
We often talk about how a $10,000 investment in the S&P over a 20 year period can grow to over $30,000, whereas missing just the ten best days can cut that $30,000 all the way down to $15,000.
The S&P 500 Index has been used as a representation of the markets. Hypothetical example for illustrative purposes only. Source: Morningstar Inc. Ibbotson SBBI US Large Stock Total Return Index. Assumptions: One-time investment of $1 on January 31, 1960 in the S&P 500 Index. Indexes are unmanaged and cannot be invested in directly. Past performance does not guarantee future results. You should always keep in mind, though, that you can’t count on the market to behave the same way in the future as it has in the past. These comparisons, while a helpful way to evaluate your investment options, should not be considered predictors of future performance. There is no guarantee that any investment strategy will achieve its objectives
Now just imagine the impact if you moved to cash in March of 2020 and forgot to move it back. Locking in losses like that is incredibly hard to recover from in the world of investing. Please contact us. We are here as your guide, as your sounding board. We are here to help make sure you do not outlive your money and you are thinking through the right way to plan for your future.
We know how hard it can be but reach out anytime and do your best to stay the course.