‹ Back

~War, Donald Trump, and your Savings~

 

Financial advisors love to send around the kind of chart below when bad things happen.  And of course, war is a terribly bad thing.  Charts like this can be helpful in providing some perspective on what always feels like a crisis we've never seen before.  And of course, every time a crisis happens, it is true that we've never seen it before.  The question is, what should we do in response to each crisis?

 

 

For me, the chart above provides two important lessons.  First, bad things always happen and always will.  In fact, the chart above is missing a lot of bad things (too many to name, but here are a few):  the Korean War, the assassination of JFK, the assassination of MLK Jr., Watergate, Chernobyl, 9/11, the 20-year Afghan war, Russia's invasion of Ukraine, January 6th, Trump's "tariff tantrum," etc.  Markets often fall during these periods.  The problem is we don't know for how long and by how much.  And statistics show that the best days in the stock market tend to follow the worst days.  And, historically, when investors have missed those best days, being out of the market has significantly hurt their long-term returns.  So this can provide some reassurance about staying invested.

 

Secondly, just because markets have always recovered, doesn't mean that they will in the future - and sometimes it can take a long time for them to recover.  So it's important to have a portfolio that is appropriately structured for each investor's needs.  Do they have an appropriate emergency fund or cash reserves?  Do they have assets that don't always move the same way as the stock market?  When will they actually need to access the assets in their portfolio?  How much will they need to access, if any....etc.  

 

Periodically reevaluating these kinds of questions is critical to having a plan that can help you sleep at night.