April Market Mayhem: Stay or Go?
Takeaways:
– If day-to-day market swings are rattling you, making you rethink retirement, or considering going back to work, you simply have too much money in the stock market.
– Proper allocation of “money at risk” versus “money not at risk” is what helps you sleep at night.
– For nearly 100 years, markets have been up about 75% of the time (3 out of 4 years on average).
– The long-term historical rate of inflation is 3%.
– The long-term historical average return for stocks (15 years and longer) falls between 9-10% per year, ahead of inflation and bonds.
– It’s important to have balance between money for long-term investments and money needed in the next 1-3 years.
– Day-to-day, week-to-week, and month-to-month market changes are terrible yardsticks to use for financial decisions.
April Market Mayhem: Stay or Go? Links
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Wall Street Journal article (paywall):
Dow Headed for Worst April Since 1932
April Market Mayhem: Stay or Go? Transcript
I want to spend a minute or two talking about “turmoil in 2025.”
I’ll begin this by saying that we are advertisers in our local weekly paper here.
It’s called the Coast Star. It’s a paper for the local communities in southern Monmouth County.
If you’re not a subscriber, you should really think about getting it. Because everybody wants to know everyone else’s business.
We run an ad in that paper every week for a long time.
What got my attention this week was a letter to the editor, and it talked about all this turmoil that’s going on in 2025.
The person who wrote the letter said that “a friend of his who is retired, is so rattled by the drop in stocks that this friend has decided to start looking for work again.” And then they continued that “another friend postponed his final step into retirement because of the instability of the stock market.” And then also added that “another friend who suffers from anxiety and depression is worse off than ever before,” because of all this turmoil that’s going on.
We want to acknowledge that, you know, the news has been… newsworthy.
But the bigger point is, if the day to day market swings are rattling you – or making you rethink retirement – or postponing your retirement, or thinking about going back to work, then you simply have too much money in the stock market.
Period.
We’ve done many videos in the past where we talked about “don’t bet the rent.” This, these are good examples of people who are deciding that they’re going to try and make a little extra money.
When they really shouldn’t be doing that.
Proper allocation – of “money at risk” versus “money not at risk” is really what’s going to help you sleep at night.
We really try and drive this point home with our clients. You need to have a proper balance between what’s going to be at risk, that is what’s long term dollars. Versus short term dollars.
Now, there was an article on April 21st, just a couple of weeks ago, in the Wall Street Journal. The headline read the Dow Jones is headed for its worst April since 1932. That was published on April 21st.
When April ended, the Dow Jones was down less than 1%. It was down 0.9%.
So these day to day changes in the market…
Even week to week changes,
Month to month changes in the market…
These are terrible yardsticks for you to be using.
We’re not in the prediction business. We don’t know what the markets are going to do this year or even from year to year.
But (there are) a few numbers that you really should know.
For nearly 100 years, markets have been up about 75% of the time.
What we mean by that is – on average, 3 out of 4 years, the markets are up. You know, “up” could be fractional, it could be really small.
Or it could be, you know, a 20% gain.
We don’t know. But 3 out of 4 years, around 75% of the time, markets are up.
You should also know another number: the long term historical rate of inflation is 3%.
Bonds are good, they’re going to… you should keep safe money there.
But (bonds are not going to keep) up with inflation.
The long term historical average return for stocks… now, we are talking 15 years and longer, falls between 9 and 10% per year.
Far ahead of inflation.
Far ahead of bonds.
But it’s important, as I mentioned earlier, to have that balance between “money that’s for the long term” and “money that’s going to be needed in the next year,” or in the next 2 years.
And it maybe for you, maybe even in the next 3 years. You need to find that balance that’s going to really work for you.
