Hey guys.
This is Justin Goodbread here with Financially Simple.
So in a client meeting today, and the client made the comment.
He said, "Justin, I'm gonna lose everything because of the stock market."
Um, and that was more of a rhetorical question.
It's an emotion.
What's happening right now as I record this on January the 9th 2019 is we are receiving
our statements, whether it be 401(k) statements, whether it be our portfolio statements managed
by your advisor.
We're receiving our statements in the mail, and we're noticing that our account values
are considerably lower than where they were in October of 2018.
Now, most Americans who watch the news realize the stock markets are down, various markets
are down through the end of 2018.
It was a pretty interesting quarter.
A lot of different indexes were down.
2019, the markets have rebounded a little bit thus far as I speak on January the 9th,
but the emotion is still there because we're looking at a point dated 12/31 from maybe
the beginning of the year, January 1st of 2018, or maybe you remember that high number
you had on October of 2018.
Now, you're looking at your statements dated December 31st, 2018, realizing, "Oh my goodness,
look how far the value's dropped."
And so there's an emotional tendency, a financial bias we have to take things to the extreme,
and that's what this individual is doing.
They looked at what happened in a very short time period from October through the end of
December and then pushed that extreme short time period, that compression, into a long,
irrational time frame.
So the way I describe it is like this.
As many of you who follow me on the channel know, I live in East Tennessee.
I live in Knoxville, Tennessee, and it is the wintertime right now, at least it's supposed
to be.
We actually had a cold front come through last night, but imagine if I'm looking outside
my house window, and I see that it snowed one inch in an hour.
What if I turned to my lovely bride Emily and I said, "Hey Emily, it just snowed one
inch in an hour.
If this thing keeps up, we're gonna have 20 feet of snow come February.
Go ahead and grab the 3 kids.
Throw the stuff in the car.
Get the dog.
Grab the goat.
Forget the chickens.
Let's head to South Florida, and let's buy some milk and bread along the way."
That would be a little crazy, wouldn't it?
Because, more than likely, it's not going to continue to snow for an hour, and it's
not gonna continue to snow an inch for an hour consistently between now and February.
It's just not gonna happen.
Well, do we know for a fact it's not?
No, but we have reasonable expectation.
We also know that it's never happened before.
In the market, whenever we go through a tough time, the market - historically speaking - is
not going to continue to drop.
Now, we know that past performance is not indicative of future results.
Just because it's never continued to drop and go to zero in the past doesn't mean it's
not going to do it in the future.
I mean, we know that.
There's always a risk involved, but any reasonable person looking at trends or looking at the
way the markets work believes that the market will continue to provide us a reasonable return
for a long period of time.
So just because the market had a bad quarter doesn't mean it's time to grab the babies,
grab all the animals, get in the car, and head South.
That doesn't mean it.
It doesn't mean to jump out of the market.
It may be the opposite.
Maybe in your particular circumstances you need to buy a little bit more.
I don't know, but I wanted to give you that preference or that framework.
Now look, nothing about what I'm telling you is a recommendation.
I don't have a clue, and no one in their right mind knows what's going to happen in the stock
market.
No one knows.
I don't care who they are.
They do not know, and if they say they know what's happening in the stock market, they're
lying.
Run as fast as you can.
But this one thing I do know.
If you will, trust the markets for the long-term, they're still one of the best places you can
make money.
It really is.
So now's not a time to sell.
Now may be the time to buy.
Talk to your CFP.
If you don't have a CERTIFIED FINANCIAL PLANNER, someone who understands emotions, understands
the bias we're talking about, reach out to me.
I'll be more than happy to chat with you.
Guys, like I say every week, life is hard.
Life is complicated.
The stock market will make you wanna pull your hair out, which is why mine is so small
so I don't reach up and grab it during the day.
Look, life and money doesn't have to be complicated.
Let's continue to make our lives, at least, financially simple.
Ya'll go out and create a great day today.