iStock_000000792216_SmallYou need a valium to watch the stock market these days. And granted there are some valid facts to worry about: the market is officially in correction mode, down 10% from its recent peek. But, keep it in mind that stocks have been surging since 2009; this “correction”  is just a fancy word to say you have to give some back. And we haven’t really had a correction since 2011, so we’re due. History shows that this is the time to buy, because things are on sale (and who doesn’t love a good bargain!). At the very least, sit tight. Here’s what these recent market updates mean for you:

1. What does this mean for people retiring? Yes, if you cashed out your 401k today it would be worth less than last week. But look at what you’ve gained since 2009. Look at the stellar growth over time. There’s no given to the market. No one said when you signed up for a retirement plan that you’re guaranteed anything. It’s like if you go to vegas and at one point you were up $500 but then you ended up leaving with $300…are you going to cry about the $200 you lost or rejoice over the $300 you won?

2. What’s going on in China? There is a common saying investors use that goes: “When China sneezes, the world catches a cold.” China’s state invention in propping up their economy is something international investors have always counted on. It’s been a bit of a *wink wink* *nod nod* situation. But there are doubts that the Chinese government has lost control of the economy. The thing is that they aren’t going into a recession, they are just slowing. And if there is less growth but they are still growing, then the larger economies like ours will be just fine. (Fun fact: exports to China account for 1% of US GDP! Yowza!)

3. Here’s the takeaway: Stocks hit an all-time high a few months ago. As we’ve discussed before, investing in stocks will yield you 10%-ish over time. Adjusted for inflation, which is about 3%, you’ll have real growth of 7%. To get these returns, however, investors must be willing to accept the fact that values will occasionally go down. Sometimes declines are rapid, and they are usually stressful, annoying, and unpredictable. But the ability to hang onto investments (or add to them) during downturns is key to getting great long-term returns.

So take a chill pill. Play the money game. If anything, go shopping. Like they say, “buy low sell high.” A famous economist once said that investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Vegas! (But as Rich Bitches know, long-term investing is so much smarter. And can afford you that trip to Vegas, too.)

By | 2017-01-23T08:54:58+00:00 September 15th, 2015|Finance 101|1 Comment