I get an e-newsletter by a smart financial advisor named Jay Mooreland. His focus is not on beating the markets or beating our clients into submission about saving enough. It’s about recognizing how our brains work, often contrary to our best interests, to sabotage our progress in personal finance.
Jay recently addressed a Wall Street Journal article that said that investors sure hope the stock market “returns to normal” in 2024. I wonder what they think they are hoping for?
Thanks to the folks at The Balance website for providing this handy chart of yearly returns of the S&P 500. I’m just going to show a snippet of it so you get the idea.
Now, the historical average of the S&P 500 is 10%. Does that mean that 2004 was the only “normal” year in this 10 year period? No! Normal is up 28% or down 22%.
Anything can happen in a calendar year. Look at 2023 as fresh-in-your-memory example:
The US stock market as measured by Morningstar’s US Market Index was essentially flat by early March, enjoyed a fairly steady mid-year climb, sunk alarmingly in October, only to set fire and gain 12% in the fourth quarter to end up 26% for the year. This is up 36% from the bear market low of October 2022.
If you had sold your stocks in despair in late 2022, look at the gains you would have lost. Of course, none of my newsletter readers would ever sell during a market downturn!
By now you may have guessed that this is one of my blogs that encourages you to create a low cost, diversified portfolio and then ignore it except for once per year when you might take a peek and rebalance.
If it’s been a while since your last portfolio look-see and you want to make sure you are on the right track, email me to set a time for a plan review.
