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Sometimes, when I feel myself getting wrapped up in drama in my life, I like to take a second to zoom out and put things in perspective.
And no, I don't mean ask my therapist about it. I mean, really zoom out. How will whatever I'm going through right now figure into the grand scheme of my life? Or, you know, in the scope of human history — from the dawn of man until the heat death of the universe? Maybe I'm a lunatic, but it usually brings me some comfort.
Right now, there seems to be daily drama with the stock market. From early January through mid-October, the S&P 500 fell 25% on a cocktail of bad news, which included rampant inflation, rising interest rates, a continuing pandemic and a land war in Europe. Stocks appear to have been making a comeback of late as some market watchers believe inflation may have peaked.
Still, some economists believe now is a great time to sell, with the current uptick representing a brief respite before a more painful recession hits in 2023.
So what's an investor to do? Buy? Sell? I personally like to keep an eye on 1987.
Remember 1987? Investors who were around at the time definitely do. On Oct. 19 of that year, the Dow Jones Industrial Average fell 22.6% — the largest one-day drop in that index's history. The day came to be known as Black Monday.
Headlines at the time were terrifying. Crash! Panic! Bedlam on Wall Street! All told, between Aug. 25 and Dec. 4, 1987, the broad U.S. stock market lost 33.5%. If you were looking at your portfolio at the time, it probably looked like a disaster. Some 20 months later, the market had fully recovered and would go on to achieve new highs.
In light of that fact, I recommend the following exercise: Type "S&P 500" into Google. When the chart comes up, select "Max." Now find 1987.
The historical upward trajectory of the stock market has reduced it to a tiny blip on your screen, and that's the point all the market experts who tell you not to panic and to stick to your long-term plan are trying to make.
If the market continues to behave as it always has, whatever your portfolio is doing today, tomorrow or next year ultimately won't matter much in the decades that you're likely to be investing.
As long as you're investing consistently in a broadly diversified portfolio of stocks, any drama in your portfolio will eventually matter as little as it did in 1987.
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