Feb 27, 2020
Stash’s CEO on Weathering the Storm
It’s important to consider choosing your mix and to invest regularly
I wrote to you a few days ago about the coronavirus and its impact on the markets. The markets are continuing their slide again today, with indexes entering what’s known as a correction, as fears about the spread of the virus have grown.
I’ve said it before, and I’ll say it again. It’s important not to focus on the short-term noise. The only guarantee I’ll ever give you is that markets will go up and they’ll go down, and nobody can say with certainty where they will be tomorrow. However, over time markets tends to go up.
What should you do now?
When markets go down, you should stay the course. Specifically, we think it’s best for everyone to invest in their Mix and turn on Auto-Stash. Auto-Stash 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. Your Mix is a diversified grouping of bonds and stocks that are global. (There are three types of mix: conservative, moderate, and aggressive.) You can find the mix investments by searching “mix” in the app or in the balance section of investments. If you already own the mix, bravo—keep adding to it on a regular basis.
The Stash Way is the best guidance we can give for up markets and down markets. Simply, consider investing small amounts in your Mix and other investments, on a regular basis. We make this easy with Auto-Stash. Now, more than ever, is a time to set it and let Auto-Stash work it’s magic.
Market performance over time
We’ve shared this graph with you before, but it’s essential to keep top of mind. The following shows the performance of the S&P 500 for the last 25 years. The S&P 500 is an index that reflects the earnings of the 500 biggest companies in the U.S., and it’s considered a benchmark for the entire stock market. Over time, you’ll see that the price of stocks tends to go up. You’ll notice this chart includes some pretty steep sell-offs in the past, such as the Dotcom bust, and the mortgage crisis that led to the recession in 2009.
Source: Yahoo Finance, February, 20201
There are a couple of things that I want to say. First of all, when the markets fall, it can be a great buying opportunity, just like when the markets go up. Here’s the thing: We’ve been in a bull market for about ten years with stock prices basically going straight up. Some may say the price of equities, or stocks, is perhaps even too high.
And when stock prices fall, as they have for the past few days, it’s a chance for you to add to your Mix and other investments at lower prices. (As a reminder Investing involves risk. You should always take your personal circumstances into consideration when making investment decisions.)
Follow the Stash Way
So what is the Stash Way? We’re glad you asked! It’s a fundamental part of our investing strategy, which has three pillars.
- 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.
- 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.
In addition to buying one of the Mixes and sticking to the Stash Way, here are some other tactics to consider.
- People often flock to gold and other precious metals, in what’s called a flight to safety. Why? Gold is gold–it’s a hard metal that always has value. (A word of warning though, gold prices can also be very volatile.)
- You can also consider bonds. Did you know that a generation ago, when people talked about investing in the stock market, that mostly meant they were investing in bonds. Believe it or not, the bond market is much larger than the equities markets, and can provide a measure of stability, acting as a counterweight to stocks. In fact, bond yields often stay stable when the stock market drops.
- Park My Cash (search for it in the Stash app) is an option if you want less “ups and downs” and a lower risk investment.
We are in this all together. Stash is your financial home and your financial partner, and we are here for you.
Founder and CEO
1This is not a prediction or projection of performance of an investment or investment strategy. Past performance is no guarantee of future results. Any historical returns, expected returns or probability projections are hypothetical in nature and may not reflect actual future performance. The rate of return on investments can vary widely over time, especially for long term investments including the potential loss of principal. For example, the S&P 500® for the 10 years ending 1/1/2014, had an annual compounded rate of return of 8.06%, including reinvestment of dividends (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). The S&P 500® is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe, made up of companies selected by economists. The S&P 500 is a market value weighted index and one of the common benchmarks for the U.S. stock market.
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