Stock Market Crashes 634 Points – How to Remain Calm
By now, most of you know or have heard that yesterday was a horrific day on Wall Street.
The first day of trading after Standard and Poor’s downgraded the United States credit rating to a Aa+ from a AAA sent shockwaves through the international community as well as Wall Street. The 634 point drop yesterday, might just be the tip of the ice berg. Analysts are convinced that the debt deal did nothing to convince investors that the United States is committed to getting out of debt, and therefore the massive sell fest began.
What does this all mean for you as a student, or as a parent planning for your child’s future?
Maximize the investments you can control!
Nobody can control or predict the stock market accurately 100% of the time. People claim they can, and they are all proven liars. In fact, when you invest in a security you will always see the disclaimer that “funds invested in the stock market are guaranteed and the investing company is not liable”.
So if the stock market cannot be trusted to secure our future, what can we put our trust in? You can invest in your education!
Studies have shown that students with higher degrees of education make more than those without, with an overwhelming majority. Your college degree is the gateway to a world of opportunities that simply do not exist without a college degree.
I know you might be thinking about the rare exceptions in our world such as Bill Gates and Mark Zuckerberg. I cannot deny that they did not graduate from college and they are two of the most influential and wealthy people in the world. But once again, they are a RARE exception.
The best way to secure wealth in the future is to arm yourself with the credentials and experience that will help you earn more money over the course of your lifetime. Having a college degree is an excellent start.
I also encourage you to become an entrepreneur, or at least have an entrepreneur mindset. The greatest source of wealth in our economy is small businesses. As a college graduate, you will have the chops to create the business of your choosing. Even if you decide not to start your own business, thinking like a business owner will get you far within any job that you have.
So, even though you cannot control the stock market, you can control your most important asset class: YOURSELF!
Time is on your side!
It is also very important to remember that time is on your side. Hopefully, you are not a Wall Street trader (if you are, please put down the coffee and breathe…), and since you do not trade stock minute by minute, you have time on your side.
The stock market has fallen more than 634 points before, and it has rebounded.
The stock market crashed in 2008, then it rose back to glorious heights in 2010. Now it is falling again.
If you look at a historical summary of the stock market you will quickly see that this is simply how life goes on Wall Street. A series of gains and losses, ups and down. However, the historical average return is hovering around 10%.
This means that if you invest your money for the long-term, and leave it untouched, it should eventually reach that 10% annual return mark. (Once again, historical prices do not indicate future results with the stock market).
We can get into much more detail later about how to re-balance your portfolio to ensure maximum safety, but for now please know that I highly recommend index funds that mirror the market.
They are cheap, and easily understood.
Take a Deep Breath.
So the stock market took a nose dive yesterday. It will probably fall again today. It might even continue to fall for the week. If you focus on the long-term investing time frame that you have, and continue to maximize your personal education and career, then you can switch off the news and stop worrying about Wall Street.