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Financial planning for financial independence

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Unnecessary Fear

Today it was announced that a referendum for Britain to exit the European Union has successfully passed.  This comes as a bit of a surprise, as most predictive measures pointed to a “stay” vote prior to this morning.  Accordingly, U.S. equity markets have been trading down today about 3% or more on the uncertainty.

I encourage you to reflect on the fact that market movements (up or down) in connection to headline news is a function of normal and healthy capital markets; hence, there is no reason for long term investors to be fearful on intra-period jolts.  Each year, history has posed numerous worries to investors and this is no different.  What is consistent is that the market has rewarded those who stay disciplined and invested.  Most importantly, do not day-trade your accounts or invest on knee-jerk reactions to news.  In contrast, make sure your investments are well-diversified and structured to weather --- and take advantage of --- turbulence over the long run.  Fear is the friend of long-term investors!

Food for thought…

January 1, 1986:  S&P 500 = 211.28

January 1, 2016:  S&P 500 = 2043.94

Consider that during this 30 year period, we saw the savings and loan crisis, the Persian Gulf War, the collapse of the Soviet Union, the dot com bubble, the 9/11 attacks, the war in Iraq, Hurricane Katrina, and the US mortgage crisis, just to name a few.  Yes, markets reacted negatively to each event, but handsomely rewarded those who stayed invested throughout.