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Money Monday: Investing during stock market instability

Ignoring newspaper headlines and financial panics and looking at the great arc of financial history.
Photo by Patrick Weissenberger on Unsplash

This column is intended for informational and educational purposes only and should not be construed as professional financial advice for your individual situation. Please consult with a financial professional before making any serious financial decisions.

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Hello Longmont! 

I am a dad, carpenter, writer, and retired software engineer who has been living in Longmont since 2005. I used a few simple but powerful life principles to become wealthy enough to retire at age 30, and went on to start a blog called Mr. Money Mustache that has now reached over 30 million people in the past nine years. Now it’s time to take these ideas to the streets of Longmont, so send in your questions about money and life!


Dear MMM,

With the stock market so unstable right now, are there other IRA investments than mutual funds?--Jeffery Justice

Hello Jeffery,

In the short term, stock prices fluctuate on a random and unpredictable basis. During times of dramatic news headlines and fear (wars, financial panics and the ensuing recessions, and now pandemics), they jump around by large amounts. During more peaceful times (pretty much the rest of the time), they make smaller jumps.

World stock indices have indeed been more volatile here in 2020, but this is just the latest in a centuries-long string of this pattern. As crazy as the newspaper headlines always sound, there is nothing particularly remarkable about the current moment in the great arc of financial history.

So the key to successful long-term investing is to realize that these fluctuations mean absolutely nothing. In the long run, stock prices (and the equally important stream of dividends you receive for owning them) tend to grow along with the world economy. In other words, the stock market always goes up.

So you have two choices for how to manage the short-term volatility:

  1. Totally ignore the news and the stock prices. It doesn’t help you at all to check in on your investments on a daily or even monthly basis.
  2. Learn to enjoy the volatility. When the stock index drops, it simply means that stocks are on sale. I take joy in knowing that any purchases I make during this time will buy me larger shares of the underlying companies, at lower prices. Conversely, whenever the market is at record highs, I lament the higher stock prices but at least I can enjoy the fact that my net worth (on paper) is higher than it has ever been. It’s a win/win way of thinking about something you can’t actually control.

Finally, to get back to the core of your question: there are of course other ways to invest your money as well - although most don’t tend to perform as well as stock merket. There are blended stock/bond funds, real estate investment trusts (REITs), and physical real estate, whether that means paying down your own mortgage, renting out part of your own house as an apartment, or buying additional houses or apartment buildings in order to generate income and appreciation.