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faith over fear

How many times can you think of something in your life that was painful but ultimately ended up being for your own good? One of the most quoted verses we recite to each other during times of hardship or worry, is Paul’s words to the Romans, divinely inspired by God, which says, “And we know that for those who love God all things work together for good, for those who are called according to his purpose” Romans 8:28. Yet we all have this perception that life should be easy, smooth and calm and in a sinful world, it is anything but that.

The stock market is part of that fallen world sometimes but most of the time it’s a wonderful blessing from God. It’s quite honestly one of the most amazing feats of American ingenuity, allowing common folks like you and I, a chance to buy companies that in other parts of the world or generations ago, would have only been available to the super elite. Yet here we are in 2022 and companies that create incredible shareholder and community value we get a chance to invest into and own a piece of. Yet for many people the stock market is sadly something they fear and often misunderstand, hence the plentiful amount of data that shows us, as Financial Advisors, how most people do the opposite of Warren Buffett’s sage advice, they buy high and sell low. Ouch!

In today’s article, my intention is to walk you through a quick example of how stock market drops, such as the bear market we are in today, if you’re under the age of 60, should be something you are rooting for, every once in a while, to help create even more value, than would have been possible should the market gone up in a straight line.

2018 Case Study

Who remembers 2018? We had just come off President Trump’s first year in office and he successfully negotiated the Jobs & Tax Act of 2017, which gave us all money right back in our pocket, in the form of lower tax rates and he was in the midst of doing what he did best – negotiating – a new trade deal with our largest trading partner China. On top of that the Federal Reserve President, Jerome Powell was feeling pretty good about the economy, and as a result, he and his board of governors were ready to start increasing interest rates. Economically everything seemed to be going well. Around the second half of the year as the trade deal with China got tense and the market started to react negatively to higher interest rates, and eventually hit a nearly 20% decline on Christmas Eve. The only negative stock market year during President Trumps tenure in office, happened this year.

What happened to investors that started investing in 2018? How did they fare since then? They saw a negative 20% in 2018, a negative 35% in 2020 and the over 20% negative returns so far this year. No way with three negative 20% returns in that period of time, that we still came out with a positive result, right? Well, the numbers may surprise you. Let’s dig in

Ben & Arthur – A New Twist

Let’s play the Ben & Arthur game, like Dave Ramsey does in Financial Peace University, just with a twist. Let’s assume Ben had $10,000 and he came to his Financial Advisor at Whitaker-Myers Wealth Managers, on January 1st of 2018. Ben is very excited because 2017 was such a great year for the stock market and he feels like this is a great time to invest. Ben leaves his money invested from January 1st 2018 through yesterday’s close on the stock market, July 6th 2022. Arthur on the other hand, didn’t quite have the cash to invest in January 2018 but finally around the end of the year contacted his Financial Advisor at Whitaker-Myers Wealth Managers, who graciously offered to meeting with him and get his funds invested on Christmas Eve 2018 (12/24/2018) and Arthur, too, left his money invested until yesterday’s close of business July 6th 2022. Who would have had more money today and would it even be a positive result, with all those negative numbers, they had to suffer through, that I mentioned above?

Before we dive into the numbers, can you agree with me that logic would argue that Ben who invested nearly 12 months before Arthur, should have more money? In Dave Ramsey’s Ben & Arthur, that is the point, right? Whoever starts earlier ends up doing better. However, in that example they look at straight line, linear growth, which we know is impossible. Do market fluctuations or Bear Markets create good opportunities for me to invest? Said another way, if I’m younger (under 60 is definition of younger in investing, in my opinion) is a Bear Market a good thing for me?

To understand what happened to Ben take a look at this chart right here.

S&P 500 Growth Chart

You can see that Ben invested $10,000 to start 2018. He saw it get to as high as $11,000 in 2018 before taking quite the tumble near the end of the year. Not to fear, it recovered until COVID-19 when the market fell another 35%, of which he quickly recovered from and then finally he has lived through our latest market turmoil and he is sitting with $14,600 just a few short years later. Arthur on the other hand, who invested during an almost bear market (-19.80% in 2018) has a chart which can be seen here.

He saw his investment shoot straight up because he used some Warren Buffett tricks, he bought low and then he too had to deal with a -35% during the COVID years, while simultaneously to Ben suffering through our recent rout yet he now sits with $16,600. Wow! Nearly $2,000 more on $10,000 investment or 20% higher, because he invested on a 20% dip!

Think about that with me for a minute. If you were putting into your 401(k) or your Baby Step 4 Roth IRA during the year 2018 the money you put in during January 2018, while still positive actually didn’t do as well as your deposits that were put in during December of that year. Meaning that the near Bear Market of 2018 actually was a huge blessing to you as an investor. A nearly 20% blessing. The trade war with China, a man-made issue, actually became your best friend, in terms of your rate of return.

2022 Implications

What we see from the Whitaker-Myers Ben & Arthur example, is that dollar cost averaging, or saving and investing money each and every pay period can help take the emotion out of investing and turn a Bear Market (a 20% decline or more) into something that actually long term provides significant benefit to you. Knowing what we now have just learned, let’s start to re-train our brain and begin enjoying these stock market drops. Not because we enjoy watching the value of our investments decline from what they once were but rather because the greatest wealth building tool in the world has given us a cheat code – an opportunity to buy things for a limited period of time, that are cheaper, sometimes much cheaper, than they previously were. If we believe Romans 8:28 and I mean REALLY BELIEVE IT, don’t we owe it to ourselves to trust the process that has worked for 100 years. Here’s another cheat code – if it doesn’t work, it didn’t matter what you did anyways, it’s Revelation time. As always, your Financial Advisor at Whitaker-Myers Wealth Managers is here to have the heart of a teacher and help you understand how this current market is affecting your plan to achieve your goals and retire. Reach out to us today!


July 7, 2022

John-Mark Young

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