My Unusual Reason for Being Terrified of Market Declines

In 1990, the Dow Jones Industrial Average was near 3,000. Today it's near 30,000. Those who panic and sell during market corrections usually pay a high price.
Forbes Best-In-State Wealth Advisor, Cary Stamp, CFP®, puts this year's stock market correction in perspective, and shares his unusual reason for being terrified of market declines.
TRANSCRIPT:
I'm Cary Stamp with Cary Stamp and Company. One of the things that happens frequently when somebody meets me for the first time in a period when the market happens to be down, is that I always get the question, "Your phone must be ringing off the hook, isn't it?" And frankly, it's not.
We try to do a good job on the front end of our client relationships to tell them that we're going to have periods of time when the economy is going to go south, when the markets are going to go down, stocks are going to go down in value. And we also try to stress to our clients that when these times happen, it's not panic time. These times are temporary.
In the history of investing, every single time that the markets have gone down, just a short period of time thereafter, sometimes that short period is measured in years... the investors' investments, if they are in a good quality portfolio, have exceeded where they were before the decline in the market and often by many, many, many times over.
Starting in the business in 1990, when the question was whether or not the Dow Jones Industrial Average was going to get back to 3,000, gives me a little bit of perspective. 3,000 in 1990. Most recently we're close to 30,000. So in order to make ten times your money over that 32 year period of time, all you had to do was buy quality investment securities and hold on to them for the long term.
But that doesn't mean that it doesn't get into our heads as well. I don't like it when the markets go down. People ask me, "Cary, do you get scared?" And the answer is, Yes, I do get scared. I absolutely often get terrified when markets go down and especially when they go down sharply.
But I'm not terrified because my portfolio is losing value. I'm not terrified because my clients' portfolios are losing value. I'm terrified that one of my clients could possibly succumb to the worst possible instinct, which is to decide that now must be the time to get out. It's financial suicide. When markets go down, if you own good quality securities, you wait it out.
It happened in 2007, 2008, 2009. I saw a couple of people that I thought were incredibly intelligent people decide that as the market was at the bottom, they couldn't handle it anymore. And they sold. And they thought that it was the right thing to do for them at that particular time. It was absolutely wrong. It was an emotional decision controlling the wrong part of their brain that didn't look back at history and make them realize that this too shall pass.
Where we are today in 2022, with the declining markets, with interest rates rising, with geopolitical events causing us problems, this too shall pass. And I believe that the markets will do what they have always done, which is go out and take out their past highs. It might take a year, it might take two years or even longer. But if history is our guide, holding on to good quality things when the markets are down is exactly the right thing to do.
I'm Cary Stamp with Cary Stamp and Company and this has been a Principled Wealth Moment.