By Steve Henke, Hackman Hulett LLP
With the choose-your-own apocalypse nature of today’s new cycle, it may be hard for young attorneys to prioritize financial health. To that end, James Munder of Northwestern Mutual gave a great presentation last month on creating a financial plan to get through a market recession. You can access it here, but here are a few highlights that I took from James’ presentation:
The Longterm Trend is Positive
With the Great Recession firmly etched in our minds, it’s natural to be suspicious of the stock market. James emphasized that it’s important to look at the longterm numbers. Looking at one-year returns between 1926 and 2018, he noted that the stock market as a whole, provided positive returns 73% of the time. You can expect the market to decline, but know that, statistically, sunnier days are ahead.
Don’t try to tell the future
A correlation: trying to “time the market” has a high probability of missing an upswing day and hamstringing your investment returns. Looking from 1999 to 2018, investors that invested in the S&P 500 had nearly a 4% advantage on those that missed just the ten best trading days. In other words: you’re better off investing consistently than trying to be Warren Buffet.
Be aware of your emergency options
Everyone’s financial picture is different—and now more so than ever. If you have a financial emergency, you need to consider all of your options for weathering the storm (and the consequences for each of your strategies). This year, the CARES Act allows COVID-19 certain affected people to make early, penalty free withdrawals from retirement accounts or take loans from their retirement accounts. Check out James’ presentation to hear how high level investing philosophies can impact this decisionmaking!
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