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Investors: Here’s How to Think Long-Term With Your Money

November 23, 2018

3 min read

Life comes one day at a time. And it’s easy to get caught up in your daily dramas, or chasing the dragon of immediate gratification without keeping the bigger picture in mind.

For example, you may feel the urge to eat an entire package of Oreos. But that type of behavior can be highly destructive over the long term, both for your health, and maybe for your dating prospects.

And the same goes for your finances. You may want to spend, spend, spend, but when you think years down the road, it’s clear that you should probably be considering a strategy fit for the long term.

It’s part of the Stash Way. Wait, what’s the Stash Way?

When thinking long-term, zoom out

As an investor, you’re probably focused on what’s happening with your money—possibly on a day-to-day basis. That means every hiccup in the market—including dips into correction territory—bring with them opportunities to panic.

And the market has bad days, and there are times when investors have to endure bear markets, or prolonged market declines. It happens. But what’s important to remember is that, historically, the markets have recovered.

If you look at the performance of the Dow Jones Industrial Average index over the past few decades, you’ll see that despite some downturns, the market trends upward over time:

Disclaimer: This is not a prediction or projection of performance of an investment or investment strategy. Past performance is not indicative of Future Performance.

An investor focused on the short-term may have sold during one of the downturns over the years, afraid that they’d see all of their investments disintegrate. But had they “zoomed out”, or kept the bigger picture in mind, they’d know that it’s all a part of the cycle.

If you sell your investments during a downturn, you’re effectively locking in your losses, and potentially missing out on future market gains.

Case study: The 2008-2009 financial crisis

The economy crashed in 2008 and stocks entered a bear market for roughly a year and a half. Many investors panicked, sold their investments, and as they sold and pessimism spread and the markets were dragged down even further.

Eventually, the Dow bottomed-out at around 6,500 (a loss of more than 50%) the U.S. stock market shed $13 trillion in value from its previous highs. Since then, however, the market has been bullish. As of October 2018, the Dow is hovering around 25,000—it’s nearly quadrupled over the past ten years.

Think about this

How can you stop worrying about the day-to-day ebbs and flows of the market, and become a steadfast, steely-nerved investor like Warren Buffett? While you can prepare your portfolio by adopting The Stash Way, here are some other things to consider:

 

By Stash Team

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

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Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.