Stock Market’s Vanishing Wealth  

I’ve spoken to quite a few people in the last month that told me they are getting “killed” in the stock market. I listen but do not offer much commiseration. The economy and stock market run in cycles. It is not static and has never been static. It is constantly in flux.

Over the last ten years, even including the tanking in March 2020, we’ve had a huge run-up in the stock market. The people I’ve spoken to have been invested in the market for more than ten years and primarily have well-diversified portfolios with reasonable cash flow. I tell them they should look at the stock portion of their portfolio and suggest that it is likely that more than half of their total value is comprised of gains. Their wealth isn’t vanishing; it is just going through another part of the cycle.

You can check your own accounts and see if that is true for you too. I am sure it isn’t so for everyone and possibly not for those that entered the market in the last few years, but for long-term investors, I believe this to be the situation. So, my friends, all that has happened is that you’ve given back some of your gains.

If you are still brooding about your “losses,” then ask yourself: at what point would you have cashed out of the market? Perhaps you would tell me that it was at the exact moment the market reached its highest point before the drop. That’s not logical and makes no sense, just as it makes no sense that you would have gotten out of the market each previous time it reached a new all-time high. And it also is not logical that you will exit the market at the current levels. Hopefully, you are in the market for the long haul, and in the long run, there will be plenty of ups and downs, but the overall long-term trend should continue. 

If you were parking some shortly needed funds in the stock market, you violated my “rule” that the stock market should be only for long-term investing. If you neglected to build up rainy-day cash funds leaving too much of your money in the market, then you have a “minor” problem if you have to sell stocks to get some needed cash. If you’ve set up your investments in a reasonable way, then what is happening now in the market doesn’t really matter except that you might not feel so good about the drop. If you have adequate cash flow from your investments or need your cash flow supplemented and have those funds set aside, then it might not matter that much either. If you have an undiversified, highly concentrated portfolio, it might matter.

If you are investing regularly through 401k deductions, you have a great buying opportunity with the discounted prices, so the drop is not so terrible for everyone.

The asset allocation in your portfolio and the size of your portfolio, and the amount of cash flow from your portfolio is your business. “Crying” about losses is not going to elicit any sympathy from anyone, especially when they believe it is highly likely your portfolio has greatly appreciated over the past ten years. Further, cry all you want to me, I don’t care, and at this point in my career, I am immune to false senses of pity. However, you might be crying to people that do not have decent-size portfolios, and you likely would elicit envy, jealousy and anger. Why would you want to put yourself in that position vis a vis someone else? 

Get over it. The market is undergoing its normal cycles, albeit maybe with a little exaggeration. It will correct itself and get back on target. When? I don’t know the timing, but it will. Just wait and see.