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Index and Chills – Don’t Get Spooked When the Market Does

The #StockMarket always goes up. Expect for when it goes down. So what's an investor to to? #IndexandChills

Happy Halloween, Campers! Today is the day when much of the Western world celebrates an ancient Celtic harvest festival by donning costumes of all sorts to ward off evil spirits and ghouls.  Actually, much of the Western world has no idea why we celebrate Halloween, they just like to dress their kids up and send them off to ask strangers for candy.

This particular Halloween might be a bit spookier than most, especially for those of us new to The FIRE Movement that have enjoyed massive stock market gains since deciding to get our financial act within the past decade or so. That’s because this massive bull run appears to be slowing down. For many investors this could be their first bump in the road.

Most of this year has been great, but October has seen year-to-date gains wiped out.  The market is now at a lower point than when the year began (at the time of this writing, we’re down -1.21% for the year after seeing highs over 8% a short time ago).

Spooky times indeed!

Every Stock Market Recession

While we’re only down a mere 1.21% right now, let’s take a quick a look at every single recession the United States stock market has experienced.  Just to spook ourselves a little.

Since 1927 there have been a total of 14 recessions.  Here’s what they look like on paper.

How Long Does A Recession Last?
SOURCE: S&P 500 Index – 90 Year Historical Chart

The Most Recent Recession

The most recent recession happened in 2007 and it lasted 18 months.  This was the Great Recession and the market pulled back a whopping 50% during this time.

Can you imagine how terrifying and gut wrenching it would be to watch your stocks plunge by half?!

The Worst Recession

The Great Depression which began in 1929 not only lasted a whopping 40 months, but it was the most severe pullback ever seen, dropping as low as 86% at one point.

Holy $#!7

The Shortest Recession

The recession that took place in 1945 was the shortest, lasting just 8 months.  If were headed for a full blow recession right now, I sure hope it resembles 1945.

But what if we’re are headed for a period of prolonged recession?  What if were headed straight for another 2007 or 1929?  Have you got the stomach for that nightmare?

Stocks Get Spooked Sometimes

In the chart above I showed you all 14 recessions. Now take a look at this chart that shows S&P perforce year by year since 1927.

Index and Chills: S&P 500 Index - 90 Year Historical Chart
S&P 500 Index – 90 Year Historical Chart

That’s a lot of red.  Kind of looks like blood running down your monitor.  Or like money disappearing from your account.

So what then is an investor to do when the index gives you those terrifying chills?

Here’s what I’m going to do: index and chill!

I’m not going to do anything different than I’m doing today.  I’ll keep investing as I always have, and for the most part, that means stock piling index funds.

The Stock Market is Like a Zombie

Just when you think the stock market is dead, it comes back to life. It’s like the un-dead because you can’t kill it!  You can knock it down temporarily, but the stock market ALWAYS goes up.

Index and Chills: S&P 500 Index - 90 Year Historical Line Graph
S&P 500 Index – 90 Year Historical Line Graph

Despite fourteen recessions, a number of major political and natural disasters and everything else we’ve thrown at it, the stock market continues moving in the unmistakable direction of up and to the right.

Yes, there have been, and will be down times (some of there are terrifying!), but the ups far outweigh the downs.

Our current 1.21% dip might be spooky, but it’s not apocalyptic.  Not even close.

Index and Chills

Stay the course.  Don’t panic and do something foolish like killing your golden goose.

Just index and chill.  Keep buying those index funds and put up with the tricks so that later on you can enjoy all of those tasty treats!

Don't get spooked during a #StockMarketCrash. The #StockMarket always goes up. Expect for when it goes down. So what's an investor to to? #IndexandChills

Chime in!

Were you an investor during the Great Recession? Did you bail out or ride it out?  Do you think we’re at the beginning of another stock market correction, or is this a tiny bump in the road?

By Ty Roberts

Ty Roberts is the founder of Camp FIRE Finance, and a husband and father of four living in the Seattle area. He's a fan of the 4% rule, 80s movies and music, dad jokes and cast iron cooking.

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