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3 lessons for those fearful of the markets

By David Norton - January 06, 2022

January is the time when the pundits make their rounds, offering us their crystal ball for the year ahead.

From what I can see...

A common theme for the last three years, is that what lies ahead is inherently unknowable...

...regardless of how much we may want to know (or think we know) what's next.

Is fear of the unknown standing in the way of your financial plans? 

Every single one of us makes financial decisions based on predetermined factors.

An inherent mindset.

For some, fear will be the driving force. 

If this is you, you are likely driven by a quest for security and peace of mind, but never feel secure or satisfied, no matter how much success you attain.

You probably live within your means, are well prepared for the unexpected and are a cautious, careful decision maker.

In investing terms, this might mean you wait to buy stocks until after they’ve gone up and then you sell once they start going down.

But those who base financial decisions on fear are slow to act, which means they often miss opportunities.

It's worth remembering that the market surprises us most of the time.

The last three years have been quite good for our financial plans, despite more surprises than we could have imagined.

I want to provide a brief review of each one because they offer us a few important lessons for the years ahead.


In December 2018, the S&P 500 had dropped by ~20%.

The decline culminated with the Christmas Eve "plunge," falling 2.7%.

As you would expect, very few investors were optimistic about 2019.

Despite the bearish sentiment to start the New Year...

...the S&P 500 returned 31% in 2019.



After the market's incredible performance in 2019, nobody could have guessed what 2020 had in store for us.

The S&P 500 fell 34% in 33 days.

It was the fastest bear market decline in history.

While that caught most investors off guard, what was most surprising was the market response that immediately followed.

The U.S. stock market bottomed on March 16th.

And despite the intra-year decline of 34%, 2020 surprised everyone (again!) with the S&P 500 delivering a positive 18% return.


That brings us to last year. Many expected the recovery to continue.

But as we put a bow on 2021, few anticipated the following storylines:

  • GDP - all-time highs
  • Household net worth - near all-time highs
  • Interest rates - near all-time lows

Despite the great news noted above, this year has been marred by disagreement around vaccinations, relearning the Greek alphabet, the national debt, and the highest inflation in decades.

And yet, here we are.

The S&P 500 ended 2021 up 27%, notching 70 record closes during the year. 


3 lessons learned

There are three lessons from the past three years that we should keep in mind as we consider the years to come.

1. A sound investment portfolio must be supported by a financial plan.

It's what can help us stay the course -- especially when the train appears to be going off the tracks...

Or when fear takes over. 

2. We must exercise discipline and patience to be successful investors.

Over the last few years, we've had plenty of opportunities to capitulate.

We've also had a few chances to succumb to greed.

It would have been impossible to stand by our financial plan without a healthy dose of discipline and patience.

3. We don't need to know the future to accomplish our financial objectives.

As you can imagine, people frequently ask me what I think the markets will do next.

I'd love to know that answer, but I don't and never will because it's not possible.

The good news is that we don't need to know.

I'm sure there will be many more surprising years to come.

But that's why we plan. 

Save and invest for a better life