It feels weird to say don’t get too comfortable, when the goal is to live a comfortable life. But if there is anything these last few stock market days have taught us, it is exactly this.
Don’t let financial gains make you too complacent and overly comfortable as you go through life.
I am guilty of this too at times. Just a week or so ago after tallying up the monthly net worth figures, I was joyfully telling Mrs. DS if the financials continue trending as they have been lately, we will be hitting certain targets in X amount of time. I did make sure to emphasize the word “IF” in my explanations. I know things don’t usually trend upwards in a straight line.
However, I didn’t necessarily envision the market to enter correction territory (Dow and S&P down roughly 10% from peak at time of publishing) so quickly after my boastful statements.
A lot of us have been riding high with near euphoric stock performance this past year. It is easy to get spoiled and be accustomed to these crazy financial gains.
“No matter how rich you become, arrogance is not a luxury you can afford.” A quote from famed hedge fund manager, Leon Cooperman.
Our Financial Gains Weren’t Tired Of Winning Yet!
What, you mean I can’t expect 20% market gains in my retirement accounts every year like 2017? Just when I was getting used to winning.
But to put it into context, it is like we rolled the market clock back to Thanksgiving (2017). Things are still pretty darned good. I vividly remember looking at my 401k statement returns during the 2008-2009 mess and watching things plod along at a snails pace. I was overjoyed to see a positive return at all back then. Of course, when you are still young and accumulating, a low market is ideal.
I still don’t like the idea of celebrating market corrections and downturns. Even though it presents opportunity, it also means real people are losing money. I don’t like to wish that on people. So while I have made some selective stock purchases during this correction, I’m doing my best not to get on social media and shout victory to the heavens.
Just because we are still accumulating, doesn’t mean everyone else is.
And who knows, the market could drop another 10% next week. Then I won’t look so smart. Or it might go back up. Hopefully we don’t experience a huge crash like the ones in years past. Nobody knows, not even the financial experts on TV who make millions of dollars.
I decided to stay on offense. The weird thing is I managed to fund the brokerage account the day before the carnage began. I was going to buy anyways, at higher levels. Perhaps a lotto ticket should be the next purchase? hah!
Having cash ready to deploy comes in handy. I recommend having a surplus on hand in order to take advantage of situations like this. And don’t “bank” on being lucky with timing, have some sitting in the account ready to make a buy.
Expect The Unexpected
This market correction is a big reminder that things beyond our control can go south in a quick hurry. Machines that short the market can manipulate the whole damn thing and cause a tailspin. Bye bye financial gains. Does that give you a warm fuzzy? I find it very troublesome and although I’m against most regulations, somebody needs to look into this.
Or, you could be cruising along in life and suddenly lose your job. All of a sudden you go from saving 40% of your income to barely covering expenses with your spouse’s. Bad stuff happens sometimes. I’m hoping everyone that is still in the workforce can find multiple streams of income so you aren’t dependent on one employer. Also, make sure to keep your resumes updated just in case disaster strikes. Mrs. DS has your back in this department!
I can’t help but to think of a basketball analogy called “pulling the chair.” Imagine ( or watch the link) a player backing down another player on his way to score. He feels a little resistance, decides to make an aggressive move to initiate more contact, and his opponent suddenly steps out of the way.
The player that was on his way to score is now on his backside. How embarrassing!
It is important to have plans in place, both mentally and monetarily so you don’t end up on your backside.