When Markets Turn: Stay Invested, Stay Diversified

Greetings Stashers,

It’s been a while since I last wrote to you, but it’s important for you to hear my message today concerning the recent market downturn. 

If you’ve been watching the market, you might start feeling a little anxious, but it’s important not to focus on the short-term noise. The only guarantee I’ll ever give you is that markets will go up and they’ll go down, and nobody can say with certainty where they will be tomorrow. However, over time markets tend to go up.

We are living in unprecedented times, and everyone is confronting unique challenges. Foremost, we’ve been living through the pandemic for nearly two years now. And government policies aimed at helping the economy through the downturn have also helped spark historic inflation. More recently, the Federal Reserve announced it will raise interest rates, as it wraps up a monetary program that has assisted the economic recovery.  While that’s a good thing, this has led to the market sell off we’ve seen over the last few weeks. But, at Stash, we always keep our sights set on the long-term opportunity. 

So let’s take a closer look.

Market performance over time

We’ve shared this graph with you before, but it’s essential to keep top of mind. The following shows the performance of the S&P 500 for the last 25 years. The S&P 500 is an index that reflects the earnings of the 500 biggest companies in the U.S., and it’s considered a benchmark for the entire stock market. Over time, you’ll see that the price of stocks tends to go up. You’ll notice this chart includes some pretty steep sell-offs in the past, such as the Dotcom bust, the mortgage crisis that led to the recession in 2009 and, more recently, the sell-off that occurred in March 2020 when the Covid pandemic began.

*This  graph is not a prediction or projection of performance of an investment or investment strategy. The rate of return on investments can vary widely over time, especially for long term investments including the potential loss of principal. Source: Yahoo Finance. Past Performance does not guarantee future results.The rate of return on investments can vary widely over time, especially for long term investments including the potential loss of principal. For example, the historical average annual rate of return on the S&P 500 is around 7.5%. Source:FactSet, annualized return for the period of 1/31/2001 – 2/11/2021.) The lowest 12-month return was -43% (March 2008 to March 2009). The S&P 500® is a market capitalization weighted index and one of the common benchmarks for the U.S. stock market. Investing involves risk including the loss of principal. This information is for educational purposes only and should not be construed as investment advice.

When the markets fall, it can be scary, but also it can be a great investing opportunity, just like when the markets go up. Here’s the thing: We’ve been in a bull market for more than ten years with stock prices basically going up. Some may say the price of equities, or stocks, is perhaps even too high.

And when stock prices fall, as they have for the past few weeks, it’s a chance for you to add to your investments at lower prices. (As a reminder Investing involves risk. You should always take your personal circumstances into consideration when making investment decisions.) 

How should you invest now?

It’s normal to feel nervous when the market goes down, but panic selling can hurt your portfolio rather than help it. We think it’s best for everyone to invest in a diversified portfolio and automate their investments with Auto-Stash. Whether markets go up or down, you should stay the course and only look to change your plan when your personal circumstances change (not when the market moves one way or the other). Auto-Stash should be your best friend right now. I want you to look back at this time in a few years knowing you picked up investments during all the market cycles. When you build your portfolio, we recommend buying a mix of bonds and stocks, both inside the U.S. and in other locations globally. If you already have a diversified portfolio, bravo—keep adding to it on a regular basis. 

Another option is to consider Smart Portfolio. It’s a personalized portfolio that Stash’s investment committee of financial experts developed and recommends for you based on your risk profile. 

Follow the Stash Way

The Stash Way is our investment philosophy regardless of market volatility. It emphasizes regular investing, investing for the long term, and diversification. Simply, consider putting small amounts of money in your investments, on a regular basis.  We make this easy with Auto-Stash. Now, more than ever, is a time to set it and let Auto-Stash work it’s magic.

Long-term investors (that’s you) shouldn’t be concerned with timing the market, it’s about time in the market. I’ve said this before and I’ll keep saying it—no one can predict exactly what will happen tomorrow or next week.

Here at Stash, we are looking out for your best interests and we’ll keep sending you these types of messages to follow The Stash Way of investing.  Stash+ subscribers will also get a deep dive into what’s going on in the market in this month’s Market Insights Report.  We’ve got your back and will keep you informed and educated about the markets and long-term investing.

All my best,

Brandon Krieg, CEO & Co-Founder