The Stock Market May Seem Stressed, But You Don’t Have to Be
What’s Happening In The Market?
As you’re probably aware by now, the stock market has been fluctuating over the past few days. Some say it’s because trade tensions have ratcheted up between the U.S. and China. Others cite that the Fed is expected to hike rates again at its December meeting. Stock analysts note many tech behemoths like Netflix have missed earnings expectations. But, the cause is likely a mix of many factors.
It turns out, current valuation metrics seem in-line with historical averages and the global economy remains in good shape, irrespective of what is the risk du jour. The enthusiasm that surrounded international companies early in the year was likely a little too rosy when stock markets performed well, and the recent pessimism that has driven stocks lower is likely a tad overblown. It comes down to the fact that there are always risks and rewards, so it’s important to keep them in context.
Are Stock Price Tumbles a Bug?
The important thing to realize is that stock market declines are completely normal. In fact, sell-offs are a necessity if we want the market to generate high long-term returns. The need for market volatility is an odd paradox—often, swings up and down scare enough people away to then generate superior returns for those of us who stay put.
Let’s suppose stocks never went down and we knew they would go up 9% each and every year. Under this false reality, no rational person would put cash in the bank; all dollars would flow to stocks for the guaranteed return. But if everyone threw their dollars in the market, prices would increase until stocks returned the same amount as typical FDIC-insured savings accounts, which is to say, basically nothing.
But we do have market swings, of course. The key to investing through it is, frankly, to invest through it. Over a long period of time, this volatility is oddly stabilizing. Hold a long-term perspective and do your future self a solid. We’ll have bad months and even another crash some day. But remember: If we can remain steady with this volatility then chances are we may be compensated with high returns. If we don’t bear it, we cannot reap the rewards.
Lean on SoFi
Now’s a good time to revisit your investment plan and ensure your goals and objectives remain accurate. Refrain from making any quick adjustments based on recent market fluctuations, and continue investing for the long term.
If you’re curious whether your plan needs revision—or you are a bit uncomfortable and just want to talk to a qualified advisor—give us a call. We’re all invested right alongside you and are here to help.
Our best advice for the moment? Go enjoy your Friday night.
The opinions, views and analysis expressed are the opinion of Alison Norris as of 10/12/18. Views can change as market or other conditions change. This information is not intended as investment advice, and no analysis should be considered a guarantee.
SoFi can’t guarantee future financial performance. Past performance is no guarantee of future financial results. Investment decisions should be based on specific financial needs, goals and risk appetite. Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.