Well…hello again, Mr. Market Volatility! It’s been so long since I last saw you that I was beginning to forget what you looked like. No offense, Mr. Volatility…and I say this with all due respect…life was less stressful while you were gone.
Thru the end of January, it had been 94 days since the stock market moved up or down more than 1% in one day, steadily climbing to new all-time high after new all-time high. That…Is…NOT…Normal.
That’s like driving to work and getting 94 straight green lights (and maybe an occasional yellow). As fantastic as that sounds, you know without a doubt that your improbable run will eventually end and life will start sprinkling in some red lights with the green…because that IS normal.
Our rational selves know that the stock market goes up and the market goes down. That’s how it works…but, holy **** is it tough to ignore the emotions and anxiety when the media use phrases like, “Stocks Plunge”, “Markets in Turmoil”, “Massive Drop”. It’s important to remember that headlines are written to attract readers and increase ratings. The more sensational, the better.
If the headlines have you feeling anxious, that’s completely normal. When emotions are high, facts and data are our friends and may keep us from doing dumb things with our money. Here are some facts about the markets to help calm the nerves (courtesy of A Teachable Moment):
- Markets average one decline of -14% each year (two steps forward, one step back)
- Markets finish the year positive 3 out of 4 years
- Daily dips of 2% or more occur about 5 times a year
- Every 5 years or so stock markets decline 30% or more
- Selling low and buying high NEVER works
- Over long periods, markets significantly beat inflation
- Turn off the TV & don’t check your account
- Never make important decisions based on emotion
With that said, here are the stories that caught my eye this week:
MONEY: This is the Normal Part (Bps and Pieces)
Just to hammer the point home…market volatility is normal and the ensuing uneasiness we all feel is ALSO normal. “Typically, even the best years have some very bad days, weeks, and even months. Last year was an exception to the rule.” It’s important to avoid making long-term decisions based on short-term reactions.
LIFE: One Surprising Habit That Could Help You Retire $100,000 Richer (Time)
Follow your doctor’s orders. Not only will it help your everyday health, but it may help you increase your bank account in retirement too. “A 45-year-old man with high blood pressure can save an average of $3,285 in health care costs annually over his lifetime if he makes a few simple lifestyle adjustments like taking medication as directed .”
KENTUCKY PENSIONS: Bevin broke law by hiding financial analysis of pension plan, Beshear rules (Lexington Herald-Leader)
The Kentucky Attorney General’s office issued a ruling stating, “Gov. Bevin’s administration violated the Kentucky Open Records Act when it refused to release an actuarial analysis (for state and local gov’t workers) showing how much the Republican governor’s proposed pension reform plan would cost.” The ruling calls for the document to be released to the public immediately. From here, the governor’s office can either release the analysis or challenge the ruling in circuit court.