Ouch. That Market Dip Hurt. But Investing is a Long-term Proposition.

Did you feel that massive bump earlier this month? When the stock market took that dive it was reminiscent of Black Monday in 1987 or the financial crisis that hit in 2008. Enough to give you the jitters in a major way, right? Fortunately, as of this writing, most of those losses have been regained. Regardless, though, it’s critical to understand and keep the big picture in mind.

We Know That Volatility is Not the Exception …

History has shown us that market trendlines are never straight. The trajectory from day to day or week to week will never be completely upward. Various domestic economic indicators influence how investors are feeling as do unpredictable geopolitical events. There are macro impacts from things like the health of the job market, levels of inflation and retail sales. There are also micro gyrations based on day-to-day news events like earnings reports or oil prices.

And then there are presidential election years – a category all their own – when all bets are off and speculation is rife! What’s important to note in 2024 is that – bucking the norm – markets have been unusually stable as this year’s campaign politics have played out.

Volatility Isn’t Good or Bad. It Just is!

Now is a good time to take a look at what’s known as the VIX – The Chicago Board of Options Exchange’s Volatility Index. It measures the magnitude of the S&P 500’s price movements. Swings in valuations and volatility are correlated as a tool for traders for purposes of speculation, but the index also makes a handy way to look at (and quantify) market progress over time as well as day to day.

What the VIX index shows us is that market corrections are normal, even healthy. They occur on a regular basis and, even as they affects individual stocks and overall portfolios, these fluctuations are integral to the dynamic nature of the market overall. We couldn’t make gains without them.

It’s key to remember that rapid plunges – of the type we saw earlier this month – are fortunately not the norm. Although such swings can feel like a punch to the gut for investors (especially retirees), they are a short-term setback to long-term gain. In any given year, we can expect to see volatility of about 15% from average returns.

If you’re interested in learning more about the VIX system, here's a resource.

When It Comes to Market Setbacks, Here’s What Not to Do!

The thing that keeps me up at night isn’t worrying about when the S&P 500 will fall or how far. It’s trying to think of ways to communicate to our FSR Wealth clients (again, especially retirees) the importance of keeping a level head. As financial advisers, this is our time to shine! The unexpected is precisely why we build thoughtfully diversified portfolios and allocate investments in ways designed to ensure stability and growth over time. That last bit is important: Over time.

Panicking and divesting stocks is rarely the best way to ride out even the most dramatic market bumps. Making decisions in the heat of inevitable market declines may feel like an immediate form of self-protection, but is it a sound long-term strategy? Year over year, decade over decade, the answer to that question is: No. It’s our belief at FSR Wealth that getting into the market early and staying for the long haul, even during those roller-coaster days or weeks, is crucial to optimal results. Time is on your side.

Missed Opportunity: Are You Leaving Potential Gains on the Table?

Short-term versus long-term thinking can be especially short-sighted during presidential election years, which indeed can be unusually volatile (even if that has not in fact been the case over the past 18 months). Some are tempted to pull their investments and stay out of the fray altogether until the politics are settled and the playing field going forward for the next four years is clear.

The problem with that plan, unfortunately, is that even in those disproportionately volatile years – when there are more down days than usual – by being out of the market you’re also missing out on those inevitable “up” days; the days that can boost your portfolio’s value significantly.

In other words, you might miss the crashes but you also miss the bonanzas. At the end of the day, it’s impossible to game the market. It’s not good for your health – financial or emotional!

That’s why we at FSR Wealth say it again and again and again: The only real financial plan is one that provides for stable, multi-pronged growth and security, come what may, all throughout your retirement years.

Here’s Why Our “own Your Retirement Planning Process” is Key!

At FSR Wealth we believe it’s all about building a stable fiscal house, starting with the foundation. It may not be the sexiest, but (just as with the home you live in) it’s that thing on which everything else rests. Once we have your financial essentials in place (principal protection) we can add walls to insulate you through moderate risk and growth. When we get to the roof, perhaps there’s room for some more aggressive investment options. It all depends on where you are in life and your general tolerance for risk.

We understand that market volatility is tough, especially when you’re focused on protecting that all-important retirement nest egg. Our team is dedicated to working with clients to create a resilient portfolio of assets and investments as well as a plan for how to spent income, minimize taxes, ensure health/long-term care and a develop an estate plan.

Here’s to living your retirement with confidence! How? With methodical planning, appropriate diversification and a cool head through this presidential election year and all the others to come!

Want to know more about FSR’s “Own Your Retirement” planning process? Click here to schedule a complimentary consultation or download our free retirement strategy tax guide.

Interested in all things financial planning? Check out Josh’s latest venture, “The Own Your Retirement Show,” featured every Saturday morning between 7 a.m.-8 a.m. on Chicago’s WLS 890 AM. Details available here.

Standard Disclaimer:

FSR Wealth Management is a registered investment advisor located in Elmhurst, Illinois. Information and opinions contained in this video have been arrived at by FSR Wealth advisors. All information herein is for informational purposes and should not be construed as investment advice. It does not constitute an offer, a solicitation or recommendation to purchase any security. FSR is not providing legal, tax, accounting, or financial planning advice in this video. These views are as of the date of this publication and are subject to change.