Welcome to Better Have My Money, my weekly newsletter about stocks, investing and figuring out when to buy the dip.
Have you been freaking the fuck out reading the headlines and watching all the red and down arrows in your investment and retirement accounts this week?
Let me be the latest newsletter to tell you just to calm down. If you’ve signed up to any other stocks newsletters or have brokerage accounts, you’ve been getting these “don’t panic, just relax and don’t sell everything” emails. Well, the experts are right. Chill out.
Last week everyone started flipping out over lines such as “largest one-day drop in Dow history,” “worst week since 2008” "and “$5 trillion wiped,” after news of global Coronavirus outbreaks. Which, fair enough!
But just remember, the S&P 500 is still up 10.65% in the last year. And it bounced back 4.6% today. The drop felt so low last week because the market was hitting record highs just two weeks ago. It is normal for the market to go down. I spoke on AM to DM about it on Friday, using a lot of weird eye movement.
I also actually wrote about Coronavirus and your money for BuzzFeed News, aka my day job, ‘cause everyone has been in stock market panic. I tried to explain WTF is going on:
"Part of the stock market decline is the result of stocks being overvalued," economist Mark Weisbrot, codirector of Center for Economic and Policy Research, a Washington think tank focused on economic policy, told BuzzFeed News — meaning the drop was partly just the market correcting itself.
While it was the biggest point drop in history, there have been much larger drops in terms of percentage of the Dow overall. For some historical comparison, the Dow dropped 4.4% last Thursday, however during the Wall Street crash of 1929, it dropped 13% one day and 12% the day after.
Plus, it's not like years and years of investment gains got wiped out last week.
"The stock market saw its worst week since the financial crisis as coronavirus fears gripped markets," said Greg McBride, chief financial analyst at Bankrate.com, in a statement. "But the market is still higher than it was as recently as last August."
I’m not usually a panicker — I was genuinely confused why people were stockpiling supplies when I saw people posting photos of empty supermarket shelves on Twitter and Insta, because the thought of prepping for Coronavirus never crossed my mind.
But it’s not thrilling to see hundreds or thousands of dollars that you’ve saved for gone in a short period of time. Just remember, the stock market does, eventually, come back up again. In fact, we should focus a lot more on that, because us media types focus pretty regularly on the lows, but not so much on the small everyday increases which help grow wealth consistently over time.
Appropriately, 🤑🤑🤑the most recent episode of Get Money 🤑🤑🤑 is all about savings for retirement and how I want to retire fancy. Retirement savings can seem all a bit overwhelming but it’s also super important, because you need those decades to get all that delicious compound interest.
Confusing term of the week: “compound interest” — basically interest on top of interest. It sucks when it comes to debt, dramatically growing your debt, but when it comes to saving, this is how you get rich over time. For example, $1000 earning an annual 9% interest (historically how much the stock market makes each year) is worth $20,413 in 35 years, even if you never add another cent to that principal sum.
If you’re not convinced to listen to the podcast yet, maybe this email — which I received today, and totally knocked me and the whole Get Money team over with kindness — will encourage you:
One thing an economist told me about the risk of Coronavirus to our money is that if we treat the public health crisis properly, then the stock market will take care of itself. With that in mind, may I suggest a donation to an organization such as Project Hope, which is on the ground in Wuhan, China, helping those affected.
Hope your investments grow like the love between Lauren and Cameron,
Better Have My Money is on Twitter @bhavemymoney, so please tweet nice things (aka the link to our sign up page) and tag us. Got a mate who loves to prepare for a pandemic? Forward this onto them and tell them to subscribe.
And shameless referral code time! You can use my referral code to get a free stock when you sign up to Robinhood, which has free trading. If you open an account with Ellevest using this link, we both get $20. And sign up to Acorns here and we both get $5. As always, if you've got any questions about stocks, this is a shame free zone. Just reply and ask away.