If you have been feeling uneasy this year in regards to your (falling) 401k, IRA, and/or taxable brokerage portfolio then that’s totally normal because what has happened in the stock market over the past 6 months has not happened since 1970…
The S&P 500 has had its worst-performing 6 months to start a year in over 50 years (since 1970)!
Even as a younger investor (I’m 30), I’d be lying if I said it hasn’t been tough to watch our portfolio fall as if it was a roller-coaster car descending down a 200ft drop (our portfolio below):
Fortunately, though I am only 30 and still have decades ahead of me before I will need that money. I also understand that no matter how uneasy current times are, bear markets are a part of investing and historically the market (S&P 500) has always recovered to reach new highs!
That isn’t to say that the market won’t keep falling (it likely will) and it’s also impossible to know when the market bottoms before it heads up into the next bull market. What we do know (historically speaking) is that bear markets last about 9.6 months (289 days) and stocks lose 36% on average, while bull markets gain 114% on average and last much longer (2.7 years or 991 days.)
So as a younger investor, what have I been doing this year as the market has been tanking month after month?
Well for starters, I have not panic sold a single investment (although I did do a pre-planned consolidation from selling VGT and reallocating funds into VTSAX, VTIAX, and QQQM earlier in the year). I also have continued buying as much as I possibly could every single month while the market is falling.
I even placed a buy order while writing this morning while writing this to buy more VTSAX (Vanguard Total Stock Market Index Fund):
Today marks the 1st day of July and the first trading day of a new month. For years now, part of our dollar-cost averaging strategy is to buy more index funds/ETFs on the 1st of a new month, as well as weekly every Friday (regardless if the market is up or down). We also buy more index funds/ETFs on the 1st of the month for our 2 children within their UTMA accounts.
So to wrap this up, I want you to know that your anxious feelings about the stock market and your portfolio are totally reasonable. As I stated earlier, this has been the WORST first half of a year the stock market has experienced in over 50 years!
That being said, you can NOT let your emotions bleed into your portfolio. Here is what I would do while the stock market is volatile:
- Avoid looking at the markets every day
- Continue dollar-cost averaging into your retirement and taxable accounts
- Do NOT panic and sell your assets (especially if you primarily own index funds/ETFs)
We will get through this bear market eventually. The only way that you don’t come out on the other side wealthier is if you panic at the moment. Hold strong, weather the storm, and brighter days will be ahead!