Investing is one of the ways the average American can build wealth. People often say, “I need to make my money work as hard for me as I do for it.” That phrase sounds nice until you feel the term risk tolerance smack you in the face. Your money can work hard for you, but every now and then, it experiences a few sick days. In the current economic environment, it may feel like your most valuable possession is on long-term disability and you don’t know when it will return to work full-time.
Recently, Al became curious to discover how much money he and his wife had lost in the market since the beginning of this year. To his amazement, discovering they now had about half a million dollars less than they did on December 31, 2021 made him pause. The intriguing part about this fluctuation in wealth is that it proves nothing lasts forever.
When everyone was enjoying the bull market run, it would have been easy to think that was a new norm; however, that would have been a huge miscalculation. Now that stock prices have declined, becoming too emotional might make some people deviate from their financial plan. Time in the market usually yields better results than timing the market. The decision to drastically modify your current plan could prove to be catastrophic. Selling when prices have dropped to this extent locks in your losses forever. Alternatively, your emotional sweet spot is found when you can follow a proven plan despite the ups and downs.
Experiencing almost a half million dollar loss in wealth is somewhat intriguing simply because you realize how much time it takes to accumulate that much wealth in the first place. The market does what the market does. Nobody can predict the future and if someone tells you they can, run!
