Should I be invested while markets are so volatile?
With worries of the U.S. debt ceiling, inflation, banks and the Ukraine War, to name just a few, people are rightfully concerned about the direction of stock and bond markets.
What should investors expect over the next few months? If you ask three experts today, you are likely to get three different opinions. Some believe we are already in our next bull market. Others believe we’ll hit a new low in the short-term, and then bounce back quickly. Still others would have us believe that we are in for a recession along with a huge drop in the stock market.
I can’t tell you who is right, but I can tell you this: based on over 100 years of history, being invested in the market pays more than not being invested in it.
You see, so long as there is inflation, cash loses value. Your cash today is worth less than it was worth yesterday. And that, my friends, is the only absolute guarantee in investing. Meanwhile, the S&P 500, a basket of U.S. large company stocks, has historically gone up in 62% of individual months. After one year, there is a 79% chance of gains, and after 10 years that number is 94% (all of this based on historical performance).
The takeaway here is that people who leave the market will, on average, miss out on gains. The longer they stay out, the higher the odds that the market is increasing and they are missing out on those gains. The longer someone is invested, the more chance that they are making money with those investments.
Still, investing in the markets only makes sense if it is done with proper consideration and diligence. Do you know your investment timeframe? Do you know your risk tolerance? Can you afford to lose money in the short term, if the market goes down for a few months or years? Do you either have a clear understanding of how to build an appropriate and resilient portfolio, or are working with someone who does?
If the answer to any of those questions is “no”, then investing in the stock market may not be your best option. Not everyone is in a good place to put money in the stock market. If you can answer “yes” to all of those, then you are in the driver’s seat. The longer you are safely and appropriately invested in the market, the more you are stacking the odds in your favor.
So, what should you do? If you have a good financial plan and a well-made portfolio, stay the course, you’re already winning in the long run. If you have no plan and a lot of cash due to fear of the current situation, find a professional who can help you build a plan and invest according to your needs and comfort level.
However you handle the current volatility, invest smart and invest well.
Larry Sidney is a Zephyr Cove-based investment advisor representative. Information is found at https://palisadeinvestments.com/ or by calling 775-299-4600 ex. 702. This is not a solicitation to buy or sell securities. Clients may hold positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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