Written by Tyson Ray, FORM Wealth Advisors | CFP®, CExP®, CIMA®
In March, I turned 50. It’s hard to believe! Since reaching that milestone birthday, I’ve been doing some reflection. I want to share with you some of my perspectives about investing since 1975 — half a century.
They say there are two things that will always be a reality: death and taxes. Well, there’s a third certainty, and that’s the fact that the markets will always experience ups and downs. This is such an important concept for investors to understand that I named my YouTube series, “Up or Down”.
What is a market sell-off?
It’s great when the value of your investments moves upward, but history has shown us that at some point, the value of those investments will take a dive. That is the natural ebb and flow of market prices.
A sell-off is different, though. It’s an accelerated selling of securities — including stocks, bonds, commodities and currencies — that goes beyond those daily fluctuations. A sell-off occurs when the price of an asset or security suddenly experiences a sharp decline. It can happen unexpectedly and even interrupt a bull market. Economic shifts, significant political events and missed estimates can all trigger a market sell-off. Missed earnings estimates can trigger a market sell-off because they signal to investors that a company’s performance is weaker than anticipated, leading to a loss of confidence and a rush to sell shares, driving down stock prices.
The U.S. markets experienced a sell-off in March, so at FORM Wealth, we’re thankful we did portfolio rebalancing for our clients in February.
Preparation can prevent panic
It’s easy to panic when a sell-off happens, but the best approach is always to stay the course. We always encourage our clients to avoid any knee-jerk reactions based on emotion. The key is to be prepared. Investing successfully requires a long-term approach. Market trends don’t matter when you focus on investing for the long term.
This is especially important if you are in retirement and living off your portfolio. In that situation, you definitely do not want to sell your shares when the markets go down.
We work with our clients to customize their reserves so that during sell-offs, like the one in March, we don’t have to sell. We set aside the money our clients need in advance of their need. Preparation beats panic any day of the week!
People who are trying to make a killing by trying to “time the market” often end up losing a lot more value than they would have if they had just stayed in the market. No one has ever been able to time the market, and no one ever will. For those of us whose goal is to apply stewardship principles, the key is to set money aside so it will not only be there for us in the future; it will also grow.
Since I was born in 1975, there have been times when the markets have sold off by almost half. However, those downturns were always followed by rallies.
In 1974, there was a 50 percent decline in 1974 was followed by a rally of 2,447 percent before the next 40 percent decline. The 51 percent decline of 2000–02 was followed by a 105 percent rally before the next 58 percent decline in 2008. The market has rallied 750 percent since that time (not including dividends).
By the way, if you invested $100 in the S&P 500 at the beginning of 1975, you would have approximately $31,655 at the end of 2025, if you reinvested all dividends. This is a 31,555.16 percent return on investment, or 12.18 percent per year. This example demonstrates the power of an “invest it and forget it” mindset. (This means we want you to keep your money invested; however, we always do periodic reviews and make any adjustments to rebalance your allocations as needed.)
When investors panic during a downturn and bail out of the stock market, they often miss the recovery. What I have found more than anything else is that time fixes a lot of things — in relationships, in the markets, in economies and especially with long-term Investments.
Take advantage of lower stock prices during a downturn
There is actually opportunity during a sell-off. If you are able to add to your portfolio, I suggest “buying the dip.” When asset values decrease, you can buy more of those assets for less money.
“Buying the dip” is an investment strategy that follows the basic principle of “buy low, sell high,” but with a more targeted approach. There are two requirements for buying the dip: a sharp decline in stock prices and a strong indication that they will rise again. A common scenario in which both factors are in play is when a large company’s stock price drops suddenly because of broad market fears — not because of concerns about the company’s long-term performance.
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If you do not have a plan that protects you from sell-offs, please contact us. We can help you get prepared and also take advantage of the opportunities that arise during market downturns. We also serve as your accountability partner and encourager, reminding you to focus on your long-term goals and to avoid reacting to normal market fluctuations.
