The Stock Market Is Tumbling—So What?

By January 20, 2015Investing

The Stock Market Is Tumbling—So What 01 20 2015From Saumya Vaishampayan of the Wall Street Journal: “Stock markets around the world tumbled, with the Dow industrials falling to their lows of the year, and government bonds rallied Wednesday as fears about the health of the global economy deepened.”

Unless you make your living betting stocks and timing the markets, my (financial planner) response is, and I quote, “So what?” When you peer into the microscope, you see an expanded view of what the naked eye can visualize. What is tiny appears gigantic! Can anyone say Godzilla?  Yes, it’s scary to watch and think that the monstrous organism at the other end of the tube is on your skin or floating in your Cheerios. But allow me to re-quote myself, “So what?”

Anything we see within a limited scope is likely to be enlarged in our thinking and our emotions.  Twitter is overflowing with “OMG’s…will you look at the Dow.” Can someone give me a “So what?”  Amen sister.

Unless you are retiring today or selling your investments right now, the numbers on the screen or in the newspaper are meaningless.  Our society loves, Loves, LOVES immediate gratification. We love to buy an investment and watch it zoom to new highs. We love to scratch off those little boxes and reveal lottery prizes. Unfortunately, that thinking is broken and useless. We need to replace ‘right now’ thinking with a perspective that is more rational and realistic.

Case in point: way back in 1994, 30 Year Fixed Rate Mortgages hovered around 9.5%. Today we’re talking 3.75%. The very same year, the Dow(DJIA) closed at 3834, while today we are in the mid 17,000’s.

We are not talking the stone age, folks. Our perspective has been skewed by the 24-hour news cycle, the 3 billion cable channels and the digital age of instant information.

Your financial life is a continuum. You have a short-term necessity and a long-term objective that spans business cycles, political transition and world turmoil. Just think, way back in 1994, Nelson Mandela was elected president of South Africa, Nancy Kerrigan was attacked by Tonya Harding’s bodyguard, the cost of first class postage was 29 cents and baseball was on strike.

It helps to have perspective and not let the daily headlines alter your good sense and proper view of your financial life. Yes, oil prices are plummeting. Yet, the stock markets are jittery and reacting to “fear of” stories. Don’t let the swell of stories that pump up the volume and instill panic lead you to making big mistakes. You know, intellectually, that markets go through periods of volatility and that they eventually return to equilibrium. You know that…right? It seems to have worked that way for as long as records have been kept.

“Well, what if it’s different this time and the world is destabilized and the Saudi’s push the price of oil to $3 and our economy is ruined and the Russians are miserable and, and, and….”

So what? As the old song goes, “Que sera sera”…whatever will be, will be. So get yourself off the misery train and keep your wits and your perspective handy.

There—your life just got a whole lot easier.