A version of this post first appeared at TKer.co
As much as I enjoy the intellectual exercise of researching and writing about financial markets, I find the act of investing can be very unpleasant.
When stocks are up, I worry they’ll go down. And when they’re down, I worry they’ll go lower.
Even when I look back and see the progress my portfolio has made toward my financial goals, I struggle to recall moments where I felt totally sanguine about the money I had at risk. Sure, in hindsight, I’m grateful for how far I’ve come. But my memory of the process is of anything but a smooth ride.
As the stock market set new highs this week, I reflected on this poorly timed, lump-sum purchase I made back on Feb. 18, 2025, when the S&P 500 was at 6,129. That was a day before the market topped and then tumbled 19%. Fortunately, stocks quickly recovered those losses, and I was back to breakeven within a few months. (Read more about that here and here.)
Fast-forward to today. The S&P closed at 7,126 on Friday. So in about 14 months, that purchase has returned about 16%. That’s pretty damn good. It means my portfolio continues to make significant progress toward my financial goals.
And again, while I’m grateful for the progress, the process was anything but pleasant.
In many ways, this period was typical.
While the past 14 months were riddled with risk events (e.g., tariffs, wars, volatile energy prices, shifting market narratives), it was also arguably consistent with TKer Truth No. 7: There will always be something to worry about. (For more on this, check out the Mar. 8 TKer.)
And as Truth No. 2 reminds us: You can get smoked in the short term. Since 1980, the S&P 500 has experienced an average intra-year max drawdown (i.e., a decline from its high) of 14.2%. Taken together, last year’s 19% drawdown and this year’s 9% pullback reflect historically typical volatility.
Finally, Truth No. 5 says: Earnings drive stock prices. And recent earnings and future earnings estimates both look very strong. So it’s not crazy to see stocks recover quickly from their recent sell-off.
The worst thing you or I could’ve done was make some bad trades in an effort to time the market’s peaks and troughs. This process of selling and then buying is incredibly difficult to do in a way that beats just holding through the volatility.
All this speaks to the power of education. Knowing what’s always happening in terms of uncertainty, what could happen in terms of volatility, and what drives prices over time helps keep you psychologically prepared for moments when your emotions pressure you to make what could be costly mistakes.
A version of this post first appeared at TKer.co
