I came across this quote the other day and thought it was absolutely brilliant!
If you knew everything was really all right, and that it always has a happy ending, then you would not feel trepidatious about your future. Everything is really so very all right! If you could believe and trust that, then, immediately everything would automatically and instantly become all right. –Abraham-Hicks
Believe it or not, at first I had no idea who Abraham-Hicks are. I had to check with Mrs. T, who has been reading quite a number of book on the Law of Attraction. She then explained to me that Abraham-Hicks is not a person but rather Abraham is an entity and Hicks are two people (Jerry and Esther) communicating with the Abraham.
Anyway, I thought this quote is very fitting given the recent stock market volatility. It seems that almost every other day there’s a “big” market correction because someone said something or something happened. Some people are worried that there will be major corrections and we will soon see a major bear market.
The thing is, the stock market goes through bull and bear cycles. Sometimes the market goes up, sometimes the market goes down. But if you look at the long-term stock market performance, there’s an overall upward trend. If you had invest money 20, 30, 40, 50, or 60 years ago, generally speaking, you should see a positive return.
Take the Dow Jones in the last 10 years… you probably felt bleak, terrified, and hopeless when you went through one of these red dots…
But if we could step back and look at the big picture, hopefully it should be easy to realize that the overall picture is highly favourable to those of us that have time as our ally and are diversifying through time.
Let’s not forget that the Dow Jones average has more than doubled in less than 10 year’s time.
Here’s another interesting chart to show the positive trajectory…and the terrible times you would have gone through the last 40 or so years.
So if you know that in the future everything is really very all right and you can believe and trust that, then there is no need to feel anxious and stressed out right at this moment.
Why create the extra stress and fuzz when everything will be OK in the end? Stop wasting the unnecessary energy, stress yourself out, and make yourself sick.
Be positive and remember to be greedy when others are fearful, and be fearful when others are greedy.
A few readers have asked me what we plan to do when there’s a major stock market correction.
We don’t plan to change anything with our investment strategy. We plan to continue saving and continue buying dividend paying stocks and index ETFs. When there’s a major stock market correction, we plan to save even more money so we can buy more stocks at a discounted price. When we are in the accumulation phase, we want the market to stay cool so we can accumulate assets at discounted prices. Facing a bull market makes it harder to accumulate assets at reasonable prices.
We all need to remember that the financial independence journey is a marathon, not a sprint. We will have our own personal struggles on our own financial independence journey. Unexpected expenses may come up and result in the need to spend a lot of money. We may get discouraged and disheartened by these unexpected expenses because that means lower savings rate and therefore less money to invest in passive income generating streams.
But if you step back and look at the big picture, feel good that you are making great progress and that you are doing better financially right now than you were a year ago.
You will reach financial independence one day, it is just a matter of time. Does it really matter if you reach financial independence 1 year from now, 5 years from now, 10 years from now, or 25 years from now?
Instead of rushing through the financial independence journey, learn to slow down and take a few breathers. It is totally OK to prolong your FI journey. Nobody is judging you.
Personal finance and reaching financial independence is about taking the small steps each day and allowing these small steps to add up in the long run to create a giant financial impact. Sometimes you might be taking a small step forward; sometimes you might be taking a small step backward. On those days that you are taking a small step backward, it is important to remind yourself to look at the big picture and remind yourself that overall you are still making a positive progress.
Look at the big picture, believe in yourself, and trust that everything will be all right in the future.
If you are just starting out your financial independence journey, welcome. It’s a long journey, connect with other like-minded people to help you along the way.
If you are already on your financial independence journey, like us, keep at it. You will get there in the not-so-distance future. Connect with people in the personal finance/FIRE community and see if you can learn something from each other.
If you are already financially independent. Congratulations. Play forward to the FIRE community. Share your knowledge, help out those in the FI community, and spread the word.
For some of the younger readers who have been investing for a short time they may think that the market will always go up. It’s human nature. I started saving fairly aggressively in 1998 and looking at that graph I had a good 5 years of flat performance. It is very easy to get discouraged but you have to look at the long term and have bold faced confidence you are doing the right thing. Don’t continue to move things from here to there hoping for better performance.
I also recommend looking at the big picture and believe that the long-term trend will continue to be positive.
Admittedly this is easy to say and much more difficult to do. When there is a large correction/recession (everyone around you is selling, your portfolio is down 30%+, every media outlet is screaming the end of the world, etc.) it’s very difficult to keep perspective, even for seasoned investors. I will never forget 2009 when those events I listed were a daily reality. Anyone could have made a killing buying then, however few actually did.
I’ve gone through a few times where my portfolio was in the negative territory. I held on strong. Looking back, glad I did that.
I love this – it’s exactly what I was telling myself to take into March. I COULD fuss at every single penny and worry worry worry that we won’t save enough to FI in ten years. And I probably will, if I don’t stop myself. OR! I could trust that our systems are good and just need some tweaking now and again. That’s something I can try on for size.
🙂 There’s definitely no need to fuss at every single penny and be constantly worrying about things.
That graph is a thing of beauty alright. I should paste it on my wall and look at it when the market takes a tumble. Sometimes we need to take the 10,000 foot view.
Yup taking a bigger view to see what’s going on is very important.
Nice. No question you need to step back look at the bigger picture and enjoy life now.
Timing the market is impossible i swore the market would pull back today after all these steel tariffs have been mentioned but my stocks took off on both the tsx and nyse.
Id welcome a pullback as it would be more drips and better buying opportunitys. Just wouldnt want it to be like japans market! Who would of thought it would take this long to recover.
December was a hard month to find a deal or fair valued stock. Right now i think there are lots out there.
Cheers
Exactly, timing the market is nearly impossible. Yes the stock market might be overpriced right now but if you just keep investing consistently, you will time average the cost basis over time. I certainly would welcome a pullback.
Like, Joe, I’ve never heard of Abraham-Hicks either. But it’s a damn good quote. Master your lizard brain and you’ll master your finances. Nice post, Bob. It made me think.
Just like you I had no clue before talking to Mrs. T. Definitely need to train that lizard brain of mine more.
I like this thought a lot. I’m invested for the long haul and it’s done very well for me.
However, what if the market dropped 50% tomorrow and just kind of stayed there without going up much for a very long time. It may sound like a silly proposition, but the Shiller P/E is trading at nearly 33. It historically is around 16. If things go back to where they were throughout 100+ years of the stock market, we’d be looking at a 50% drop and not really a recovery (unless earnings go up.)
I think people should be prepared for that scenario. Or maybe “this time is different” and people are willing to pay 33 P/Es. I think historically, “this time is different” hasn’t worked out well.
I would welcome a 50% drop because we’d be able to buy stocks on more of a discount. If the market just stayed there (after 50% drop) without going up much for a very long time, I’d guess a lot more people would flop over to dividend stocks so they can get more of a consistent return. Also, if the market just stayed there, it would perhaps change how people react to the stock market.
Makes sense. If you are still making income and buying stocks that’s great. If you are retired and perhaps spending down a nest egg… that’s not so great. Also, that kind of recession would cause a lot of job loss and financial misery for many, many people.
I just wanted to bring up the idea that if you use P/E value analysis, it could be argued that the market shouldn’t be where it is (historically speaking). So that when it keeps bouncing back, it’s worth considering that there really could be “a lost decade” of no gains. (I hate to sound negative and I’m usually a very, very aggressive investor. Now I’m just an aggressive investor.)
Yea P/E value analysis to determine whether the market is overvalued or not makes sense. We’ll have to see what happens in the next decade. 🙂
That is true in every context. At an intergalactic level what we do has no noticeable effects. I agree with your point. If you invest with a strategy (taking into account liquidity & risk) … there is nothing be afraid of way. I personally don’t wait for buying opportunities. I invest as and when I get some money.
That’s an excellent plan you have there. 🙂
This is quite timely as I have had to take out a large RRSP loan to avoid paying taxes this year. I’ve been worried That I’ve been stagnant for a while in growing my stash. I need to remember that it’s all a process and things aren’t always going to go according to plan.
On a good note, I did score a 13% raise at a new company which puts 8% into a pension for you!! Oh, boy…
Glad that this article was quite timely for you. 13% raise at a new company is pretty awesome!
i read a lot of these here blogs. i read a bunch of comments in the past couple of weeks saying they would pile into new investments with 10% down. i was invested through the last downturn in 08 and 09 and piled in 10% down into some stuff like miners, oil drillers and banks and watched them fall another 60-70%, so there’s that. stepping back, calming down and looking at a long horizon can save/make you a lot of money….and owning high quality companies.
Owning high-quality companies is key… also owning index ETFs is another good strategy.
It’s all about seeing the forest instead of the trees isn’t it? Our strategy will remain the same regardless of a correction.
Yes, the trend is generally upward over the long term. The world’s population is still growing and all those mouths will need to be fed, entertained, and housed somewhere. It’s bound to be good for business.
However, it’s times like these when the S&P is above a 25 PE, that I think investors might be a little too optimistic. These small corrections are a very good thing in my mind.
Indeed Mr. Tako, seeing the forest rather than the trees. Stick with the same strategy and things will work out eventually. Yes the S&P is over historical P/E ratio, so there’s a bit of worry there, so small corrections here and there are always a good thing.
This is solid advice, it’s a good idea when investing to step back and take a look at the broader picture. These corrections, when taken in the context of a 30-40 year investment horizon are barely ever perceptible.
Looking at the broader picture is important as long as your investing timeline is not tomorrow. 🙂
My only problem with a 30-40 year timeline is that this is half your human life (roughly), it’s a time span that most cannot comprehend. Looking at the long term is therefore extremely difficult for most. Don’t get me wrong, it’s THE thing to do, but it requires discipline!
That’s true, easy to say, hard to do.
“…If you knew everything was really all right, and that it always has a happy ending, …”
Yes, it is alright.
The reality it is not alright for so many on our Earth. Yes, we are lucky here in North America, and as Warren Buffet likes to say we won the ovarian lottery by being in this place and time.
If we were born in Iraq, or Afghanistan, or Syria, or many places in Africa, our lives would be very different, if we lived at all. Humans inflict such horrors on other humans.
Regarding the stock market, yes we are lucky. At this time. If we had been born in early part of the Twentieth Century then our lives would have shaped by the Depression… not a great time… or World Wars… not a great time. Just about anywhere in Europe during one of those World Wars would have been a disaster.
So we are lucky, unbelievably lucky. Might as well admit it.
I believe we are seeing things from North Americans’ perspective… maybe people that like in Iraq, Afghanistan, or Syria think their lives are better than North Americans’ lives? Through media, all we see are the bad stuff there, but there are probably a lot of good stuff that we don’t see.
These little hiccups in the stock market are a bit more scary now though as I navigate the waters of early retirement and wanting to preserve my investments. Guess I will need to keep trying to find my writing/photo side hustle work to top up for the monthly expenses.
Having side hustles will definitely help if you have worrisome thoughts about early retirement and using investments to fund it. It’s all about keeping your options open and being flexible.
I worry if side hustle will work once a big recession hit. I’m afraid it’ll be much harder to make money on the side. We’ll see how it goes.
I’ve never heard of Abraham-Hicks either.
That quote is very optimistic, but I think it applies to the stock market. It’s going to turn out all right in the long run because capitalism works. If the stock market never recovers, then something has gone really really wrong and you’ll have a lot more to worry about than money. Anyway, I choose optimism and I believe it’ll turn out all right.
Wake me up when the stock market drops 20%. It’ll be a buying opportunity then. 10% is nothing to get excited about.
It’s very optimistic indeed but I would rather be optimistic than pessimistic. I don’t like constantly worrying about things and feeling miserable. 🙂
But you’re right, in the long run stock market should go up due to capitalism and let’s not forget the increasing population and increasing consumption.