been there done that

Been There Done That

The list seems to go on and on.

Covid is back.  The war in Ukraine rages on.  Inflation is skyrocketing.  A tank of gas is at an all-time high.  Both sides of the aisle in Washington, DC seem to be in complete disarray.

And finally the “r” word is being thrown around by many.  Is a recession coming… or is one already here?

The world faces lots of issues and uncertainties right now, and the stock market is reacting in a very negative way.  Markets around the world have seen significant declines.  Your 401k balance has likely been affected; my account is down over 30% since January 1.  Many 401k participants are getting nervous and beginning to question their investment choices.  Some may be wondering if they should participate at all.

But while the causes may be different this time, down markets are nothing new.  Remember 2008/2009?  Or Spring 2020?  And though it is easy to understand why some may be questioning their retirement plan choices, reactionary decisions to short term market conditions can lead to severe consequences down the road.  As former Fidelity Magellan manager and investment guru Peter Lynch once said:

I mean the stomach is the key organ here. It’s not the brain. Do you have the stomach for these kinds of declines? And what’s your timing like? Is your horizon one year? Is your horizon ten years or 20 years?  What the market’s going to do in one or two years, you don’t know. Time is on your side in the stock market. 

Here are a few things I’ll be doing (or not doing) with my own account during down markets.  I’d encourage you to do the same.

  1. Avoid Emotional Decisions – You want to buy low and sell high, not the opposite…and yet most people buy high and sell low. Why?  Emotional decisions.  Too many of us check our phones or watch TV or log on the internet, hear the gloom and doom, and decide, “I want out.”  If you get out at the bottom, you’ll likely miss the ride back to the top.
  2. Don’t Watch TV. – See #1.
  3. Think Long Term – These are retirement funds, not meant to be accessed for a long time. The market is going to go up and down… history tells us so.  In the spring of 2020, the S&P 500 dropped nearly 40% in two months (Wall Street Journal; S&P 500 Sets First Record Since February, Erasing its Coronavirus Plunge; August 18, 2020; Michael Wursthorn)… 20 months later it closed at an all-time high (; S&P Notches 70 All-Time Highs in Biden’s First Year; December 31, 2021; Chuck Jones).  History also tells us that down markets will come back, and long-term discipline will be rewarded.  Remember:  the amount of money in your account is only important on the day you want to spend it.
  4. Consider Increasing Your Deferral Percentage – Remember “buy low” from #1? This is exactly what you are doing in a down market, and you’ll likely be rewarded over the long term.  Down markets are actually very nice opportunities for long term investors…and increasing your deferrals during these times is the opposite of an emotional decision (again, see #1).  Retirements are made in down markets… they are collected in up markets.

We have faced rocky markets before (and will again) and a recession will happen at some point.  However, discipline and sound strategy will be rewarded in the end.

| Jay Kenerly, MSFS, CHFC, AIF®


This material is intended for informational purposes only.  Nothing contained herein should be considered as investment advice or a recommendation. Opinions contained herein should not be interpreted as a forecast of future events or a guarantee of future results. Outcomes will vary depending on individual circumstances.

Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc. A Registered Broker/Dealer and Investment Advisor, Member FINRA / SIPC. Plybon & Associates, Inc., is independently owned and operated.

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