We have hit more than 50 new stock market highs in 2021. It seems the markets have been rising for A Long Time. Does this mean the end is nigh? Should you panic?
Regular readers know that I believe the most reliable way to grow wealth safely over time is through owning stock in great American companies. And with that in mind, I offer a bit of context.
Most financial experts agree that if you are thinking about the performance of “U.S. Stocks” the index to look at it the Standard & Poor’s 500 index – the S&P 500. This index includes the 500 largest companies by market capitalization – the total value of all outstanding shares.
Here are some historical facts to keep the value of U.S. stocks in context.
- The 2020 peak market close prior to the Covid Crash of 2020 was on 19 February. The S&P 500 index stood at at 3,387.25
- The index then fell to 2,220.50 on 23 March. A drop of 34.45% in five weeks.
- As of market close on 1 September 2021, the index stood at 4,522.75. Up 103.68% from the March of 2020 low.
S&P 500 Performance as of 1 September 2021:
2021 Year-to Date: 20.65%
One-year performance: 28.23%
Five-Year Total Return: 108.69%
Five-Year Annualized Return: 21.74%
Since October 2007 (just prior to the Great Recession 14 years ago):
- Total Return: 186.96%
- Annualized Return: 13.45% per year.
Based on these statistics, I think you can see the opportunity in owning stocks. But the growth is not a straight line. The average ANNUAL decline since 1980 is 14.3% every year. The challenge is to hold on to your stocks through the drops.
One key to successful stock investing is to keep some perspective. Part of that is how often you take score. Based on statistical factors, if you owned the S&P 500 index, you would expect your money to double in 6 or 7 years. And you can expect that if you look at your statements once per year you will see growth three years out of four. But if you look at your statements daily, you will expect to see your account value down about 46% of the time.
So, where do stocks fit in your holistic financial plan? How much of your savings should be in stocks? What stocks should you own? When should you change your investments based on market conditions? All these questions are important. And they are dependent on a variety of other specifics in your life.
So, what should you do? I would suggest you find an experience, well-trained, fiduciary financial planner to help you create a holistic plan to systematically reach your financial goals.
If you would like to talk with me about your situation, follow this LINK to find a time for us to talk.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor paid by clients, not financial product manufacturer or distribution network? That would be a fee-first advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.