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As 2018 is winding down it seems the stock market may be winding down too?

As we have been saying for more than a few years, a slowdown should be expected and a bear market would be normal. If so, why all the fuss and worry?

"Everyone is entitled to his own opinion, but not to his own facts."  Daniel Patrick Moynihan 

As we have been saying for more than a few years, a slowdown should be expected and a bear market would be normal. 

If so, why all the fuss and worry?

In November I wrote a “what if” story about my parents gifting me $100 when I was born in 1945.It could have been invested in the equivalent of cash represented by US Treasury Bills, bonds or the stock market.The rates of return were 3.95% [Treasury Bills], 5.22% [bonds] and 10.79%. [stocks]

I did not benefit by the $100 and I suspect if there ever was $100 it was spent long ago.  So it never could have grown to $177,231 as it would have in stocks.

And if it had been invested in cash or bonds, spending it would have had little consequence in terms of my financial security.  Remember cash and bonds would have only grown to $1,691 and $4,003.

If this correction is causing you to be concerned remember this.  We do not need to go back to 1945 to regret “mistakes” we have made in terms of our investments.

Since 1980 there have been 36 corrections and 10 of the corrections became bear markets.  The stock market since 01/01/1980, measured by the S&P 500, has increased 11.41% annualized. In spite of 36 corrections and 10 bear markets investors made money.  They made lots of money.  Even allowing for the “lost decade of the ought’s” and the Great Recession, a few investors realized great returns and grew their net worth.

For the skeptical, let’s suppose you were fully invested when the market peaked in 2008.  You did not sell.  You stayed the course.  If you ignored all the negative news and remained fully invested, your return measured by the S&P 500 over the next nine years would have been about 8.7%.

Had you invested $10,000 in 1980, it would have grown to $604,835.47 in stocks measured by the S&P 500.

To have realized the return, you would have had to have held the initial investment in spite of 36 corrections.  A correction is a decline of more than 10% but less than 20%.  About 25% of corrections do become bear markets.  A bear market is a decline greater than 20%.

Most people reading this have squandered opportunities to amass fortunes.  Would you not agree after considering the facts? Don’t let your emotion destroy your ability to achieve financial security. 

Our view is unchanged.The outlook for equities is positive in the long run.  We continue to believe the correction is not likely to evolve into a bear market.Long term investors should not be concerned.

Volatility is best addressed by asset allocation.  We seek to set asset allocations that maximize long term returns against a need for steady and reliable cash flows to last through retirement. 

It is counter intuitive, but lower allocations to equities cause available funds to run out sooner rather than later in most retirement income projections. 

It is most important to maintain an efficient allocation to equities that allows for maximizing long term returns while sustaining cash flows throughout retirement.

Please check with your tax advisor, your Curran Wealth relationship manager, or contact Curran Wealth Management if you have any questions.  518.391.4200 • info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness. It is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  CIM, LLC does not provide tax or legal advice.  No one connected with CIM, LLC can ensure tax consequences of any transaction.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.