Have you ever noticed that the S&P 500 stock market index goes down significantly every few years, but then in one or two years, normally recoups everything it lost and then continues an upwards trend?
Have you also noticed that almost no one in the financial media ever tries to tell you that they think the stock market will improve? The negative stories are endless and the market prognostications for a bad month, year or decade are non-stop.
Do this exercise on your own:
· Go to your favorite financial website and find the closing price of the S&P 500 on the day you were born. Write it down.
· Then find out where the stock index closed at today. Write it down.
· Next, look at the events that have taken place since your date of birth. Write down all of the good events and the bad events (examples might be landing on the moon or 9/11). Odds are that you will have more bad things on the list but write them down anyway. Use a search engine to help you narrow down the biggest events of each decade since you were born. You will create quite a list if you do this for each decade.
· Lastly, ask yourself if it seems likely that the world will continue to be a volatile place? And if events will continue to occur that are on both the good and bad spectrum?
If your answer to these last two questions is yes, and this exercise is meant to point you in that direction, then you might also consider that the stock market has done pretty well in the intervening time period and that the S&P 500 index will probably continue to perform at roughly the same rate over upcoming decades.
I am not telling you to ignore the markets and bury your head in the sand. But I am telling you that things are going to be okay. The market drops that we experience will also be accentuated with market gains. And the moments when you want to sell and go to cash are the wrong times to do so.
What I am getting at here is that the downs you and I experience in the markets are temporary. They always are. Look at your date of birth price for the S&P 500 again. Now look at today. The ups are permanent.
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The views expressed here reflect the views of Alex Bishop as of February 20, 2024.These views may change as market or other conditions change. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
Ameriprise Financial cannot guarantee future financial results.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Definitions of individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor.
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