Turn Off the News
March 9, 2009: S&P 500 closes at 676
Dow Plunges after S&P Downgrade – August 8, 2011
Greece Debt Crisis: Global Stock Markets Slide – June 29. 2015
China’s ‘Black Monday’ sends markets reeling across the Globe – August 24, 2015
The Market freak out of 2016 keeps getting scarier – January 15, 2016
Global Markets drop as U.S. election results shock investors – November 9, 2016
The stock market is on pace for its worst December since the Great Depression – December 17, 2018
Stock Markets fall after China Trade Warning – August 15, 2019
August 23, 2019: S&P 500 closes at 2,847 (over 300% gain since March 2009)
Most people have a morning routine. Wake up, coffee, read, work-out, breakfast, get the child and myself ready for work, then out the door. That’s a typical morning for me. There’s one thing that gets sprinkled in throughout the routine that I didn’t mention; News consumption. Like most people, my morning routine includes turning on the news at home, checking social media sites, and watching the news at the gym. I don’t consider myself someone who follows the news closely, but I am still seeing plenty of it before I even start my workday. It’s good to be aware of current events, but the news can be a scary thing when the stock market drops.
The markets dropped about 50% from 2007 to 2009 during the recession. Many people panicked and sold their investments during this period. It’s easy to look back at that period and say that people should have held out longer and waited for the markets to come back, but it isn’t easy watching your account balances shrink for over a year while seeing bad news about it every week. Humans tend to view things in hindsight and expect that people should have acted knowing how things would turn out.
The US stock market has been increasing steadily for the past ten years since its 2009 lows. However, it hasn’t been as simple as opening your statements each month and watching the balance grow. Just look at those headlines above. All of them occurred during the last ten years. There have been plenty of events that made people worried that the next recession was coming soon.
I have had countless conversations with people about whether they should hold off on investing in the market because of an expected recession. The answer is always NO! Instead, I tell them to turn off the news for a couple weeks. Here’s why…
The media is going to exaggerate anything that happens in the markets. Your investment plan should not change because of outside factors such as the economy or politics. That isn’t to say that you don’t need to consider these factors when investing. Your plan should be built so that your investments can withstand another drop in the market without you having to make changes during the worst times.
Let me give you an example.
You should never have money invested in the stock market that you need within the next year. I don’t care what your reasoning is. You may think it’s the greatest stock since Apple in the 1980’s. You may think it’s idiotic to keep money in the bank paying little interest. It doesn’t matter. Anything can happen to the market or an individual stock in a 12-month period. Saving for something like a down payment on a home should not be done using the stock market.
Once you develop your investment plan that can withstand any economic conditions, put it into action. You will need to evaluate it at least annually to make sure that your plan matches your goals, but any changes should reflect changes in your life. New jobs, children, new homes, retirement, and so on. All these things will define how you invest your money.
So, turn off the news! The media wants you to pay attention them. They will continue to publish catchy headlines that draw you in and stir up emotions. Feel free to watch and get fired up about some of these things, just don’t let it change your investment plan. The people in DC will come and go. The economy will continue to have good years and bad. “Experts” will continue to try to predict the events of the future. Don’t let all the noise distract you. Focus on what you can control. Develop a plan and stick to it!
Mike Zeiter, CPA/PFS