Magic of the stock market revealed in a year

36 thoughts on “Magic of the stock market revealed in a year”

  1. Big dip in February and big increase recently. Just imagine if you didn’t check the market or accounts weekly or monthly. You’d never even know the event happen. All about the long term plan.

    1. Ha! Good point, Brian. If you hadn’t checked earlier in the year, you probably wouldn’t know of the dip the market took. ๐Ÿ™‚

  2. Very good reminder! Sometimes you just have to hold on tight and brace yourself, you know it will be a bumpy ride. Have faith, have tunnel vision, and stay focused on the long term!

    1. Stay focused on the long term – yup, because the long term seems to work out when the stock market is involved. Well said, Green Swan. ๐Ÿ™‚

  3. This might be my favorite of your recent posts, Steve. Like most, I took a painful hit in February. However, I’m not complaining, because as you said, I have since recovered just fine. As an added benefit, the struggling market was one of the motivating factors in my decision to pay off my MA loans in lieu of upping investment contributions.

    1. Thanks FinanceSuperhero, appreciate your kind words. Nothing wrong with getting those loans paid off sooner rather than later. Being debt-free is a huge contributing factor to building real wealth. You’re on the right track, for sure. ๐Ÿ™‚

  4. The last year was the first time I saw negative returns on my quarterly 401k statement – thankfully I had been reading and preparing for those moments and didn’t have an epic freak out

    Once people understand dollar cost averaging they should cheer (if they are still contributing)

    I have stopped reading a lot of money sites – the constant doom predictions piss me off

    1. Agreed, Apathy Ends – I don’t pay attention to doom and gloom scenarios either. I’ve read a bunch of them in the past too. The fact is nobody has a clue what is going to happen. The market is a fickle thing with a mind of its own and controlled by emotional and often irrational people. It’s a crap shoot sometimes, but over the long haul, works for the great majority of people who invest in it.

  5. I think it is important to keep yourself informed of what is going on in the world and what is going on with the companies you have stock in. That way you can understand the reasoning behind some of the ebb and flow. You may not be able to predict it but it won’t be such a shock when it happens and you won’t make irrational gut choices when your stocks swing in value.

    1. Acting irrationally is definitely one way to lose money in the market. Keeping it in and letting your stash rise and fall with the market usually works out. Just let it go. ๐Ÿ™‚

  6. Can you clarify the comment about how reinvesting dividends would have improved S&P 500 returns?

    It sounds like there are multiple S&P 500 indexes that account (or don’t account) for dividends differently.

    1. Eric – I meant that by reinvesting your dividends instead of taking them out in the form of checks, you’ll grow a bigger and bigger stash due to those reinvestments, which in turn will build a more solid foundation for future exponential growth. We always reinvest our dividends instead of cashing them out.

    1. Yeah, we aren’t much over 1% I don’t think either at this point. But that’s fine – slow and steady growth is what the market is all about. ๐Ÿ™‚

  7. Stock market has a tendency to go up in the long run. We’ve definitely recovered from the Feb drop. This is why you shouldn’t bother checking your portfolio value on a daily basis. ๐Ÿ™‚

    1. There is definitely wisdom in not checking on your portfolio on a daily basis. I am probably on a weekly basis now based only on sheer curiosity. ๐Ÿ™‚

  8. AND… I think it’s set for a bit downturn soon. If we can all just sit back and not panic, we’ll all be fine! I love that no 30-year rolling market period has ever lost money. Stick to the long view. And, as you say, enjoy the ride!

  9. I’m an early retiree, at 55 and now 59. My wife and I have continued to stay invested in a 70/30 mix of stocks and bonds. You’re right Steve. The best approach to investing is to stop paying attention to what happens day to day. I always say that I invest the way I do because I don’t know what will happen this year but I’m certain that the result will be positive over ten years.

    1. Thanks for your comment, Carl. I love your attitude, and you’re right, I don’t know either what will happen this year or next, but over time, smart investors will make money.

  10. How dare you insult my uncle and his theories on communist invasion!

    Seriously though: Yup, I freaked out in February, and I’m freaking out much less today. I know there will be other opportunities to freak out though… I guess I’m becoming more sensitive to those as I’m getting closer to my FI number…

    1. My deepest apologies regarding your uncle! ๐Ÿ™‚

      And yeah, there will always be opportunities to freak out. And it’s even okay to freak out as long as you don’t do something rash like pull all of your money out of the market. ๐Ÿ˜‰

  11. I’m still in the red for my Roth and our taxable account, but part of that has to do with when we started. Still, I’m white knuckling my way through this and trying to enjoy the ride. Long term, long term, long term. I actually should probably weave that phrase into my Vanguard password. ๐Ÿ˜‰

    1. Hey Penny – yeah, your starting point will affect things, but in the end, it won’t matter much when you started. Just like the rest of us, you’ll have lots more green than when you started out. It’s a wonderful feeling! ๐Ÿ™‚

  12. I actually want a new bear market to be official (I think we actually are in one) so that we can get it over with and move with the next bull. Trying to explain that one needs to be in for the long haul even with these fluctuations is difficult for some, particularly for my students.

    1. You and me both, Jason. It’s the right time for me personally since we’ll be retired next year and living entirely off of our savings. You NEED fluctuations to make serious money, ironically.

  13. I’m currently at all time highs… It happens regularly for someone in the beginning of their wealth building years like myself. Right now contributions rule all, but market fluctuations also have a big effect. Luckily I don’t get too emotional about this stuff, and I’m all about the long-game.

  14. Yes, I definitely remember the “February Dip” well because I gave my resignation notice for early retirement to my boss on 2/9/16. Nice time to do it when the market was in a -10% swoon! Fortunately, we entered early retirement with ~3 years of spending in cash, so I knew we could ride out all but the most severe market declines without cashing any bond funds or stocks out.

    1. Amen to that, MrFireStation. Our goal is exactly yours, around 3 years of living expenses in cash so we don’t have to touch our investments for that long. ๐Ÿ˜‰

      1. Curious how you start the process of getting three years of cash. Selling investments, saving along the way, etc? (if there is a post on this then yay! I’m new) Hard to keep that money out of the market and/or remove that chunk from the FI total nestegg slated to keep growing. We have 7 more work years till hubby is 60, then live off 3-4% a year till RMDs & SS @ 70 kicks in. Thanks.

        1. Excellent question, Mary. Really, it’s as simple as devoting more of our savings over to it rather than funneling it towards our brokerage account. It’s really just a redirection of extra cash from longer term savings to shorter term. We started a few months ago, so by the time that we officially retire, we should have enough in our short-term savings to live out a few years before having to touch our investments.

  15. Certainly can’t argue with almost 90+ years of proven track record and 10% average returns. The only place I can think of I would rather put my cash would be real estate. Curious whether you have any in your ‘portfolio’?

    1. Nope, I don’t invest in real estate – no real reason why, either…just never did it. Honestly, I don’t see that changing, either. Good ol’ index funds and managed targeted retirement accounts are good enough for me.

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