When people think about market risk, they often picture a single moment in time.
They remember hearing that the stock market "lost nearly half its value" during the dot-com crash or the financial crisis, and imagine investors watching half of their life's savings disappear overnight.
But that's rarely what actually happened.
Imagine investing $50,000 in the S&P 500 in late 1996. By the peak of the technology boom in early 2000, that investment had roughly doubled. Then came one of the worst bear markets in history.
The headlines focused on the market falling nearly 50%.
What they didn't mention was that many long-term investors weren't falling from their original investment—they were giving back a portion of several years of extraordinary gains. Even after the decline, many were still ahead of where they had started.
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This is one of the ways our minds distort risk.
We tend to judge bear markets from the highest statement balance we've ever seen, not from the decades of saving, compounding, dividends, and market growth that came before it.
Unless you’re one of the people who can gleefully focus on buying more shares at fire-sale prices, these declines aren’t fun. But here is where we have to invoke “TINA” (There Is No Alternative). Other than saving or inheriting every single dollar we will need to spend over a 2-3 decade retirement, most of us must invest our savings during the working years to reach our goals.
To achieve financial freedom, we must make peace with every aspect of successful long-term investing.
Successful investing isn't about avoiding every decline. It's about understanding that market setbacks are part of a much longer journey. When we zoom out, what feels like a devastating loss often looks more like a temporary interruption in a lifetime of wealth creation.
That's why we build long-term plans instead of reacting to short-term snapshots. Headlines capture moments. Financial success is built over decades.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Securities and Retirement Plan Consulting Program services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC. Advisory Services offered through Western Wealth Management LLC, a Registered Investment Adviser, dba Kennebec Wealth Management. LPL Financial, Kennebec Wealth Management LLC and Western Wealth Management LLC are separate entities.