Veritas President and Financial Coach
Investment Advisor Representative
On the wall at Veritas Financial Services hangs a photograph that my daughter, who was living in Virginia, sent me. It is not particularly impressive, just a car parked at a curb. The street and the nearby grass are dusted with about a half inch of snow. More about that in a moment.
Are you feeling skittish about the stock market? Do you wonder if you might be better off putting your hard-earned dollars in a certificate of deposit, your savings account--or under your mattress?
No, I wasn’t serious about the mattress, but I often talk to investors who are fearful about their portfolio. And who could blame them? After all, here are a few headlines from leading financial publications and newspapers. They probably will not surprise you:
1. “Wave after wave of selling again moved down prices on the Stock Exchange today and billions of dollars were clipped from values.”
2. “The…volume of retail sales went down an estimated 10% last year."
3. “In one hectic week, the paper value of the 1,545 stocks listed on the Big Board plunged by $30 billion—which is more than the GNP of Australia, Sweden, and Ireland.”
4. “The U.S. banking system has been stretched very nearly to the limit.”
5. “The recent crash bears an uncanny resemblance to the crash of 1929.”
6. “Most Americans have lost faith in the stock market.”
What may surprise you about this gloomy list of quotes is that the first one is from 1929, the next is from 1947, then 1962, 1974, 1989, and the last one is from 2002.
I could share many more such headlines, but the point is that market ups and downs do not mean that the financial sky is falling. They happen.
The reason stocks have historically returned more than fixed income over the long-term is precisely because stock holders endure the volatility of the market. Without the volatility (risk) that goes hand-in-hand with stock ownership, the returns associated with stocks would diminish, and so would the attendant wealth.
There are many positive things that we can learn from a look at investing history, including the crashes. Here are just two: First, there is ALWAYS a recovery, and second, the highest historical returns follow a crash. In fact, the single largest recovery followed the single largest crash! What happened to the investors who decided to “put their money under the mattress?” Right. They lost.
Remember the photograph story? My daughter sent it to me for a laugh. She was astounded that a snowfall that would hardly merit a passing comment in Wisconsin managed to shut down the entire city of Norfolk, VA. The picture hangs on the office wall to remind me of a very important fact: IT IS ALL ABOUT PERSPECTIVE.
If you would like to learn what else history’s market crashes have taught us, Jeremy or I would be glad to talk with you about your investments. If you are out of the area, we still may be able to set up a meeting, or perhaps we can connect on Skype.
Just give us a call at 920-893-5262.
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