Sep 8, 2020
Markets Rise, Markets Fall
Turn on Auto-Stash and think long term. Volatility can be your friend.
Now that the summer is drawing to a close, I wanted to take a moment to reflect on some of the important market-related events of 2020.
What a market year it’s been so far. After falling more than 30% in the early spring, markets not only recovered their losses, but they made substantial gains. By early September, the S&P 500 had increased more than 60% compared to its low in March. One of the big reasons: Giant tech companies have been on a tear. In fact, just a handful of companies, including Amazon, Apple, Facebook, Google, and Microsoft have driven most of the market momentum.
There are numerous other causes for the market rally, including some fundamental improvements for companies that benefit from people staying and working from home, government stimulus programs, and technical trading factors. But a lot of the uncertainty from the beginning of 2020 still remains today. Specifically, investors are questioning if the economy will continue to rebound, what will happen with Covid when kids go back to school and people start heading back to work, and who will win the November election. Sometimes concerns over the future can cause the market to become volatile, especially after a very dramatic move in one direction.
Invest for the long term
So here’s our message for you today. Consider your long game, and continue investing regularly. Market volatility and market turbulence like we’re seeing today is normal. Markets go up, they go down, and they sometimes go sideways, it’s impossible to predict where the market will go in the short term.
Here’s what we recommend. First, turn on Auto-Stash. Consistent investing—regularly buying quality companies and funds you believe in—and playing the long game is much better than trying to time the market. Don’t focus on the daily ups and downs. Remember, investing is about time in the market, not timing the market. Think of every trading day, regardless of whether markets are up or down, as an opportunity to add small amounts to your positions.
Also remember, all investing involves risk, and while you can make money, you can also lose money that you put in the market.
How Auto-Stash can help
When markets go down, you should stay the course. Specifically, we think it’s best for you to keep investing in a diversified portfolio and turn on Auto-Stash. It can be your best friend right now. I want you to look back at this time in a few years knowing you picked up investments during all the market cycles. A diversified portfolio can include bonds and stocks that are global. Stash now offers a new tool called portfolio diversification analysis1 that can help you stay on track, offering your current portfolio a score and suggestions about how to stay properly diversified.
Then, simply consider investing small amounts–even $1–on a regular basis. We make this easy with Auto-Stash. Now, more than ever, it’s time to set it and let Auto-Stash work it’s magic.
If you had invested $10 per week in the market, using Auto-Stash’s Set Schedule feature from the end of 2007 through the first week in March 2020*, you could have more than doubled your investment to have nearly $14,000 in your portfolio. That includes all the market dips, including the most recent Covid-19 pandemic.
Turning on or updating your Auto-Stash is the easiest way to add small amounts of money to your investments on a regular basis. This way, you’ll avoid the emotional aspect of investing and won’t get fooled into trying to time the market.
Remember the Stash Way
Then follow the Stash Way, which includes regular investing, proper diversification, and taking a long-term view. By taking a long-term view and consistently investing small amounts, you can allow your money to work for you.
It’s the best guidance we can give for investing in up markets and down markets. Just a few words more about each of these ideas:
- Invest regularly: Even if you take small amounts and invest them every week or every month, that can add up through the power of something called compounding. Remember the Stash investing minimum is less than one dollar.
- Invest for the long term: Over the years, market gains have outpaced standard savings rates in bank accounts. Looking ahead, experts expect markets to return about 5%. With the power of compounding and regular investing, you have the ability to build wealth for the financial future you want.
- Diversify: Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.
Stash is your financial partner, and we are here for you—to help you meet your most important financial needs and goals during these challenging times. We have some exciting new features in the pipeline and cannot wait to show you really soon!
Thanks for being a Stasher!
1Stash through the “Diversification Analysis” feature does not rebalance portfolios or otherwise manage the Personal Portfolio Account for Clients on a discretionary basis. Each Client is solely responsible for implementing any such advice. This investment recommendation relies entirely on the responses you’ve provided regarding your risk tolerance. Stash does not verify the completeness or accuracy of such information. Investing involves risk, including possible loss of principal. No asset allocation is a guarantee against loss of principal.