Simply Money

Simply Money

Each weeknight at 6pm, Simply Money makes money simple for you. Join hosts Amy Wagner and Steve Sprovach as they share easy-to-understand and...Full Bio


We're in a bear market. Now what?

Question: Jeff in Colerain Township: I’ve lost a lot of money over the last couple weeks. Is this going to last a while? Should I be pulling money out of the market? This is getting really terrifying.

Answer: We know that times like these can be really, really scary, especially when you see your hard-earned retirement savings quickly nosedive. But we want you to take a long, deep breath. Because, while it sure doesn’t feel like it right now, the stock market is resilient… just like America herself.

Think about it. There have always been crises that have triggered market losses – the Great Depression, global wars, a presidential assassination, political scandals, terrorist attacks, the ‘dot com’ bust, the Great Recession. Yet, when you look at a graph of the S&P 500 Index (which tracks the biggest 500 companies in the U.S.) since 1930, what you see is something that looks like a person playing with a yo-yo while walking up some stairs: While there are frequent ups and downs, overall, the trajectory is upward. No matter what’s been thrown at it, the stock market has always bounced back. Sure, it’s taken a long time in some instances, but eventually, stocks head higher.

Also, keep in mind, you actually haven’t “lost” money yet – as long as you haven’t sold anything. Right now, the losses are just on paper. We know these may seem like hollow words, but they’re the truth. Selling now means you’ll actually “lock in” your losses, which will likely only deepen your pain and anxiety. 

However, we also know that, despite everything we just said, you might still be thinking, “I don’t care, I just want to get out of the market. When things look better, I’ll get back in.” But do you know when that will actually be? It’s highly doubtful. On March 9, 2009, there were headlines saying things like: “Report Projects a Worldwide Economic Slide,” “Credit Markets are Seizing Up,” “Lean Factories Find It Hard to Cut Jobs Even in a Slump.” Things looked pretty bad. But guess what? That day was actually the start of the ‘bull’ market that we enjoyed for the last 11 years.

Similarly, besides being hard to do, trying to time the market can be costly! At Allworth, we looked at a hypothetical $100,000 invested in the S&P 500 at the start of 1995. If that money was not touched until the end of 2019, it would now be worth more than $1.1 million. However, even just missing the 10 best days of market gains over that same period would mean that money would have grown to only $568,000. Miss the best 20 days? Just $352,000. Markets can rally just as quickly as they fall down – and it’s practically impossible to know when those moments will happen.

Do we know how long this decline will last? No. All we have is history as our guide. We know that the average ‘bear’ market (which means the market is down at least 20 percent from its most recent high) has historically lasted about 18 months. The recovery period is about 39 months. So, could things get worse from here? Yes. Will the recovery take a while? Potentially. No one has a crystal ball. So, what can you do right now? We recommend reevaluating your asset allocation, which is your mix of stocks and bonds, as well as your risk tolerance. Because if this large market drop has you losing sleep at night, one of those components of your financial plan (if not both) are likely not properly aligned for your needs. And remember, if you’re still years away from retirement, you need to keep your eye on the long term. If you’re currently in retirement and need income, this may be the time to use your “emergency” fund (that you hopefully have) and allow your investment accounts the chance to recover.  

The Simply Money Point is that, through the years, we’ve always tried our best to be your financial voice of reason. So please, listen to us when we say, wewillget through this. 

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