The stock market has been bumpy for most of this year, particularly in early April. People who checked their 401 (k) recently found that the value had sunk dramatically.
The day after President Trump announced his tariff plan and the markets dipped by roughly 3%, an acquaintance sent me a text asking how my investments were doing. He said he had lost $23,000 in value overnight. My first thought was that I was happy to hear he had enough invested to be able to lose $23,000. My first response was that I wasn’t retiring soon, so my accounts had time to rebound.
A fact he was well aware of.
I realized my friend wasn’t nervous about my (or his) retirement. He was using the subject as a conversation starter. Later that same day, I did the same thing with two coworkers. Joking with them, I thought the market dip was good news because it would put off their retirement.
But if I were retired, would I be reacting differently? Maybe, but it is unlikely. The market tends to bounce back over time. If I were retired, I hope my reaction would be that the market would likely come back—it always does—and I would only withdraw a small portion at a time.
But it doesn’t seem like that is human nature. We tend to lose perspective.
In an overgeneralized case, if you had put $100 in the markets in 2022, you would have had $120 within a year. If you had left it alone, it would have become $142 by the end of last year. If the markets drop 10% this year, it would have a balance of $128. Your $100 would have made you $28 over three years. Hooray for you; you can afford all the eggs and toilet paper money can buy. (My example assumes eggs and toilet paper make up less than 1% of your budget.)
Even though we have had higher inflation than usual in the past few years, the markets have outperformed inflation.
I learned the lesson of fluctuating markets early in life from my grandpa. He was a farmer. So, during the first half of dinner (served at noontime in the Midwest), you always had to be quiet so he could hear the market report. The guy and the radio would rattle off a bunch of products, followed by prices and months. It seems confusing if you don’t listen every day, but luckily, when I was hungry on the farm, I got to hear them.
If the price went down, he would tell us how much money he had lost based on how much corn he had to sell. It was always a four—or five-figure number—big bucks to anybody, especially a 10-year-old.
One day, I asked, “Grandpa, how much corn did you sell today?”
He replied, “None.”
So, I said, “You didn’t lose anything yet.” Based on his reaction, we never talked about the price of corn again, but I knew I was on to something.
One difference in my grandpa’s situation was time. He wasn’t able to sit on his product for years. Corn has a shelf life. The rest of us have time.
It’s sad to lose tens of thousands of dollars overnight in investments, but I keep reminding myself to take a deep breath and to keep the long run in perspective.
I encourage you to open your Bible and read Luke 12:24-26 for insights on this topic. In fact, I recommend reading the entire chapter.
