When I last wrote to you, Covid-19 was taking off as a pandemic and markets were very volatile. As economies around the globe shuttered, markets fell sharply from their historic peaks, and then rallied, recovering much of their losses.
Over the last few trading days we have seen some increased Covid-related volatility (ups and downs), and this may continue as markets try to figure out how long it will take for the global economy to get back to pre-pandemic levels
So what’s going on and how should you think about this as an investor?
Here’s the TL;DR. Markets have been on a tear, both up and down, for the last few months, and we’ve seen the same scenes flashing by over and over again. Back in March we had some of the biggest single-day decreases in market history, triggering circuit-breakers that actually shut down trading. While the S&P 500 dropped more than 30% three months ago, it has also risen more than 30%, as retail investors have ventured back in. We are almost right back to where we were pre-Covid. Proof in point: No one can predict exactly when the economy will be back to firing on all cylinders. Use Auto-Stash to average your price and help during periods of volatility. Even $5 a week can help you stay on the right path.
What I do know is that consistent investing—regularly buying quality companies and funds you believe in—and playing the long game is much better than trying to time the market. Don’t sweat the daily ups and downs. Remember, investing is about time in the market, not timing the market. Think of every trading day, regardless of whether markets are up or down, as an opportunity to add small amounts to your positions.
Read on and I’ll explain more.
Invest for the long term
Despite the market volatility, what has not changed is that we continue to follow the Stash Way, and focus on the long term.
While the current market situation is unique in so many ways, we’ve been in similar places before. I remember investing through my first bear market in the early 2000s right after the Dot-com bust. It wasn’t fun seeing my account balance decline; however, I always had a long-term perspective. In 2008, I lived through another big market correction and hopefully soon I can say I invested through another one, the pandemic of 2020. But again, I’m thinking long term, leaning on regular investing, and maintaining my focus. I know that regular investing and taking the long view can work—it’s powerful stuff.
We’ve shared this chart with you before, but I think it’s important to take another look, because it shows the power of regular investing, even with small amounts, through times of volatility.
*Disclosure: 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. The S&P 500® is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe, made up of companies selected by economists. The S&P 500 is a market value weighted index and one of the common benchmarks for the U.S. stock market. Calculations do not reflect the deduction of advisory fees and does not take taxes or withdrawals into consideration. The hypothetical assumes an individual was invested in the S&P 500 index (assuming a 100.68% cumulative growth rate for this time period) from the time period of 11/30/2007 – 3/6/2020 with a $10.00 weekly investment contribution. This example assumes No other account account deposits, investments, fees, or dividend reinvestment. Through the power of compounded growth, assuming a cumulative growth rate of 100.68% the hypothetical value would be $13,824 on a $6,400 total contribution for the time period. Data source: FactSet.
Turn on Auto-Stash
Make investing automatic. If you had invested $10 per week in the market, using Auto-Stash’s Set Schedule feature from the end of 2007 through the first week in March 2020*, you could have more than doubled your investment to have nearly $14,000 in your portfolio. That includes all the market dips, including the most recent Covid-19 pandemic.
Turning on or updating your Auto-Stash is the easiest way to add small amounts of money to your investments on a regular basis. This way, you’ll avoid the emotional aspect of investing and won’t get fooled into trying to time the market.
Auto-Stash is an incredibly powerful tool, and an essential part of the Stash Way.
By taking a long-term view and consistently investing small amounts, you can allow your money to work for you.
Follow the Stash Way
In up or down markets, always remember the Stash Way, our investing philosophy whose three pillars are investing regularly, focusing on the long-term, and diversifying. It doesn’t involve any crazy risk taking, but is a smart, time-tested way to invest.
- Invest regularly: Even if you take small amounts and invest them every week or every month, that can add up through the power of something called compounding. Remember the Stash investing minimum is less than one dollar.
- Invest for the long term: Over the years, market gains have outpaced standard savings rates in bank accounts. Looking ahead, experts expect markets to return about 5%. With the power of compounding and regular investing, you have the ability to build wealth for the financial future you want.
- Diversify: Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.
We are all in this together. And Stash is here for you—to help you meet your most important financial needs and goals during these challenging times.
Thanks for being a Stasher!