How To Invest When the Stock Market Seems Scary
People are afraid of losing money. The stock market is down big in 2022, and although 2023 is off to a good start, the horizon is still not clear.
You may know deep down that investing is the right thing to do, but it’s definitely scary. Today we are going to discuss 3 reasons to have confidence in the future.
How To Invest When the Stock Market Seems Scary
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Full transcript:
SPEAKERS
Anthony Saffer 0:00
You may know that deep down investing is the right thing to do. But it can still be scary. Today, we’re going to talk about three reasons you can have confidence in the future. It’s Anthony and Alex with One Degree Advisors, and we help you gain confidence in your retirement. So, Alex, the stock market is on shaky ground and to go with that, the economy, a lot of people are definitely worried about that. And so people are just wondering, Well, how should I invest? Because it really doesn’t feel like the right time. There are just so many crazy things going on.
Alex Okugawa 0:30
Yeah. I mean, we can sympathize with that. Right? I mean, times are definitely scary. These are real dollars at stake. These are people’s real retirement. The thing is, though, is that the common theme among some of our best investors, and those that have done really well throughout their retirement, is people that stay optimistic, stick with their plan, and they constantly are looking towards the future. And they’re saying, I know things have gone been bad before. I’m confident that we’ll get through this next one.
Anthony Saffer 0:57
Right. So let’s look at three reasons that retirees, and even those that are approaching retirement, can be optimistic about the future.
Alex Okugawa 1:04
Yeah. And the first thing is, we’re going to put this chart up on the screen is investing through recessions. So again, what you’re seeing here is the green bars are recessions. And the main takeaway here is, look, we’ve always had problems, wars, rumors of wars, conflicts, politics, recessions, crises, the list goes on. But the thing is, if you’re looking for a reason not to invest, I can almost guarantee you, you will always find one, you will always find a reason to not invest. And the thing is, historically, humans have always found a way to innovate, they have always found a way to adapt and thrive in challenging circumstances. And again, the history of the stock market through all these challenging times is living proof of that.
Anthony Saffer 1:50
Yeah. So and then the second thing can be somebody goes, Okay, that’s great. I see the recessions and I see how the markets come back. But I don’t have 100 years, my retirement is 20 or 30 if I’m really fortunate to try and get there.
Alex Okugawa 2:02
Exactly. That chart was showing 100 years, but you’re not investing for necessarily 100 years. What if I’m investing for the next 20 or 30 years? So let’s pull this chart up. This is from Ben Carlson. And what’s really nice about this is it shows you the best and worst returns from 1926 to 2022. And it actually divides it up by rolling periods. And again, what should be the main takeaway here is, on the left-hand side, you see that one, three, and five-year performances are rolling performances. And you’ll see that range is really wide, between really good performance and really bad performance. But as you start to move along, in that 20 to 30-year range, you can see that the chances of you completely getting annihilated or making a killing really do go down. And so that’s where again, thinking even if it’s just 20 or 30 years, not 100 years staying disciplined staying the course has worked well. Now, here’s the thing. People might be looking at that 15-year period, right? What if we’re in the next 15 years when stocks don’t do too well? Because what you see there is that’s -0.2%. And we’ve talked about this in previous videos, that’s where diversification is so powerful, not just having all your money in the s&p 500. But investing in things like high-quality short-term bonds, including things maybe like commodities, or a trend-following strategy inside the portfolio can help if we do enter into a period where the stock market doesn’t do too well.
Anthony Saffer 3:27
Yeah, even diversifying globally, having cash and bonds, things that can be more stable can help with that retirement income. All right, that’s great. So the next thing is taking a look at value investing because that’s different than the growth side of the stock market.
Alex Okugawa 3:42
Yeah, and this, admittedly, is a little bit more nerdy. But as we pull this chart up, really what folks are looking at is the 10% cheapest stocks, compared to the general stock market are near all-time highs. Okay, so what does that mean in layman’s terms? Essentially, buying good quality stocks at dirt-cheap prices has never looked better. Now, if you’re investing in big growth stocks, you could argue that maybe this doesn’t look so good for you going forward, just on a historical basis, we saw basically, these valuations get elevated during the tech bubble of the 2000s. And what happened and what followed thereafter was value investing did perform very, very well. Now, is history going to repeat itself? We don’t know. All we can do is look at historical data to make assumptions about the future. But again, as an investor who is well diversified that does tilt towards value investing, I’d argue that this actually should make you very optimistic about the future of investing, especially in things like value stocks.
Anthony Saffer 4:45
Yeah, that’s great. And there are ways to really find that segment of the stock market. We also recorded a video recently on the rise in yields that apply to bonds into cash, and that question comes up why even bother with stocks when I can get, you know 4% or 5% whatever it is at the time in cash CDs, bond yields, we posted a video on that people will want to watch. You can get it here. If you’d like to learn more about how you can gain confidence in your retirement, visit our website at onedegreeadvisors.com/getstarted/.
Transcribed by https://otter.ai
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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures
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