It’s important not to let a little blip mess with your plans.
The past week wasn’t a great one for stocks. And in light of the recent sell-off, a lot of people I know are worried about the impact on their retirement accounts.
I’ll admit that curiosity got the better of me, so I, too, took a glance at my retirement account to see what my balance looked like after the sell-off. And it wasn’t so pretty. But I’m sticking with my plan to invest in stocks for my retirement for these reasons.
Image source: Getty Images.
1. My retirement isn’t happening anytime soon
If I were a year or two away from retirement, a sell-off like this recent one would rattle me a lot more. Then again, if that were the case, I’d be less heavily invested in stocks to begin with. But because I’m nowhere close to retirement age, events like this are much less of a problem.
This doesn’t mean I enjoy seeing my 401(k) lose money. But I know that since I’m a couple of decades away from wanting to stop working, there’s time to ride out this blip.
2. I’m confident the market will rebound — because it always has
The stock market’s average annual return over the past 50 years is 10%, as measured by the performance of the S&P 500. But that doesn’t mean every year over the past 50 was great for stocks.
Many of us remember the Great Recession that did a number on a lot of people’s portfolios. Even somewhat recently, we all endured a short-lived bear market, when stocks took a dive in 2020 as the pandemic took hold.
But when we look at the big picture, it’s clear that the stock market has a strong history of not only recovering from downturns but also rewarding investors who stick with it. And there’s no reason to assume the same thing won’t happen this time around.
3. I can take advantage of discounted stocks
It’s been a tough year to buy stocks because the market was doing so well until about a week ago. When sell-offs happen, it creates opportunities to buy stocks at a lower price point.
Now, I’ve never been a fan of timing the market to the day. What I mean by this is that if you try to buy shares of a given stock at their absolute lowest price point, you might end up missing out on the chance to scoop them up at a more affordable level. But buying stocks after a sell-off is, to me, a reasonable approach.
If shares were higher a few days before and are lower due to a broad market decline, that’s not an indication of a problem with the company whose stock you’re buying. Rather, it’s a market reaction. In that situation, I’m all for capitalizing on the discount.
Try to stay the course
I understand how daunting it can be to look at your portfolio and see a much lower number on screen following a sell-off. I understand because I’ve been in that boat many times myself as an investor.
Remember, though, that things like this are par for the course when you’re putting your retirement savings into stocks. And that doesn’t mean you should abandon your investment strategy the moment the market takes a turn for the worse — even if it’s a pretty big one.
