Stocks are dropping. What should you do?
With a background of high inflation and the war between Russia and Ukraine still unfolding, April has been an unhappy month for stocks. The Dow Jones Industrial Average was down 0.89% for the past month to date as of Friday, for example, while the S&P 500 Index was down 3.27%.
Maybe you’ve recently checked your retirement savings or investment account and found yourself in a bad mood. That may be good.
“Pain is a sign you’re investing well,” said certified financial planner Allan Roth, founder of financial advisory firm Wealth Logic in Colorado Springs, Colorado.
More from Personal Finance:
These states are poised to pass personal finance education laws this year
Here’s the average tax refund this year — and what you should do with yours
Medicare enrollees could see changes to health savings accounts rules
In fact, if you want to reap the rewards of investing, you need to sit through losses.
Consider this: Over the last 20 or so years, the S&P 500 produced an average annual return of around 6%. Yet if you missed the best 20 days in the market over that period, your return would shrivel to 0.1%, according to an analysis by Charles Schwab.
That’s why Rob Williams, managing director of financial planning at the Schwab Center for Financial Research, says that “for longer-term investors, we suggest staying the course if they can.”
Despite the uncertain times, history has shown that the stock market gives more than it takes.
Between 1900 and 2017, the average annual return on stocks has been around 11%, according to calculations by Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore. After adjusting for inflation, that average annual return is still 8%.
Even looking at more recent times, it’s not hard to see that people do better in the market than out.
A $1 million investment in the the S&P 500 about a decade ago would be worth nearly $4.3. million today, Morningstar Direct found.
- The Benefits of Meal Prepping for Busy Moms - October 28, 2023
- The 11 Best Cash ETFs in Canada (Plus HISA ETFs and Money Market ETFs) - October 8, 2023
- Build a Variety of Outfits with These 7 Affordable Pieces - October 7, 2023