Oct 2, 2019
Here’s What’s Happening With Markets
Manufacturing, the trade war, and even politics are concerns
I wanted to write to you today to give you some insight about what’s going on in the markets.
The three major equity indexes—the Dow, the S&P 500, and the Nasdaq have all fallen. The Dow itself is down more than 500 points as of noon Wednesday, October 2, 2019.
Here’s what may be happening: Some investors are worried about a slowdown in the overall economy. There is some concern about an industry index produced by something called the Institute for Supply Management (ISM). This index basically shows how much companies are ordering from manufacturers in the U.S. And the ISM said U.S. manufacturing activity fell in September to its lowest level in more than 10 years.
That has sparked fears that global growth might be slowing. There are other things going on as well, such as the trade war with China, Trump impeachment talk, slowing auto sales, and falling bond yields that are causing uncertainty too.
While this may be true, it may also not be. Tomorrow we may see another data point suggesting growth. While single data points may move the markets up or down, as Stashers we should always focus on the long term
Okay, so now that you know what’s going on, which is important, zoom out and take a long-term view! Today’s news is short-term noise, and markets can go up just as easily as they can go down. What I recommend is setting your sights on long-term investing, and making regular investments regardless of whether markets are moving up or down. We built Stash so you can add small amounts of money on a regular basis, and for long-term investing.
Invest for the long term!
I’m a long-term investor, and here’s what I know:
When the market moves sharply down, it’s understandable for someone to be nervous. It can be tough to see your portfolio go up and down. That’s especially the case if you’re investing for the first time during one of these periods. Hey, I was a beginner investor once, too.
During my first bear market in the early 2000s, right after the dot-com bust, it wasn’t fun seeing my account balance decline; however, I always had a long-term perspective. In 2008, I lived through another big market correction. But again, I thought long term and maintained my focus.
The most important thing I want to say is that volatility is a completely normal part of investing. Don’t get caught up in short-term market noise. Over time, staying in the market and long-term investing is the way to go.
No matter what the market does, continue to buy small amounts of your investments on a regular basis.
For some insight into the importance of long-term investing, take a look at this chart, which shows the compounding value of stocks since right before the Great Depression.
Turn on Recurring Transactions
It’s an easy way to add small amounts of money on a regular basis into your investments. This way, you can avoid the emotional aspect of investing and won’t get fooled into trying to time the market, which means trying to make guesses about which way the market is heading. (No one can predict exactly what the market will do tomorrow or next week. If anyone tells you they can, run away.)
The key to long-term investing is to build wealth over time.
That means some weeks you’ll consider buying shares when they’re high, other weeks when they’re low, and over time, the highs and the lows can balance themselves out.
Here’s why Recurring Transactions can be a great tool. By putting small amounts of money into your investments on a regular basis, you can feel good about ignoring market volatility and focus on investing for the long term. Even $5 a week can make a difference.
Recurring Transactions is an incredibly powerful tool, and an essential part of the Stash Way.
Remember the Stash Way
Investing can be confusing, and maybe even scary, when markets become volatile.
That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can guide you as you make your first investing decisions. We call our approach the Stash Way. Here are its three pillars:
- Invest for the long-term. (Don’t time the market.)
- Invest regularly. (Turn on Recurring Transactions.)
- Diversify. (Don’t just buy stocks.)
When in doubt, follow the Stash Way, which you can learn more about here.
Work hard, and then make your money work hard for you. By taking a long-term view and consistently investing small amounts of money, you can build wealth over time, and put yourself on a path toward a more secure financial future.