War, inflation, interest rate hikes, and talks of a recession have weighed heavily on the financial markets this year. A perfect storm of events making the arrival of your monthly investment statements a frightening event.
The panic that sets in may sound like:
There is no end in sight
It will take several years or a decade to make this back
If this isn’t officially a recession yet, then the worst is yet to come
I’m a terrible investor, I should have seen this coming
I’ve put my family’s savings at risk
Times like these call into question the entire premise of investing. If the additional deposits you have diligently socked away this year have done nothing but go down, you may be wondering “What’s even the point of investing?”
A valid question
But the thing is, successful investing requires time. And although this past year of volatility may carry a stress factor equivalent of ten years. In terms of historical stock market performance, one year is too short to judge what the markets can do. As you have heard time and again when it comes to investing, patience is key. Strictly basing your opinion on the dark days of a bear market misses the full picture. The market needs time to show you what it can do in a full cycle – letting both the bull and bear play out.
Patience, while your net worth steadily sinks?! I know, easier said than done. Money is emotional, and the sting of seeing it slip away is palpable.
And so this calls for a perspective shift to save you from the panic and fear-based thoughts. And the shift is this, if you zoom out and look at a long term graph of the stock markets it shows an upward sloping line. Yes there are dips and valleys that mark past declines, but still, the returns of the market have maintained an upward trajectory over the long term. Proving that the markets have rewarded long term investors with positive returns.
And there lies the answer to the question “why invest?” Because investing can help grow your wealth through the power of compounding. But compounding needs time to do its thing (and the more the better!) Let’s say your goal is to have $1 million dollars. If you’ve lost faith completely in investing and decided to simply save in order to reach this goal, by putting away $1000/monthly it would take you just over 83 years to get to the million. But… I’m sure you also want to be alive and in good health to enjoy your million, so that just won’t do. If instead, you were to invest $1000/monthly, and if your investments were to grow at a rate of 9% per year, you would get to your million in just over 23 years. Yes you just saved yourself 60 years by investing! AND in the savings example you literally had to save up and put away one million dollars to achieve your goal, but in the investing example you only had to save about $286,000 and the compounding did the rest.
Hopefully this has reignited your belief in the power of investing. But if you still feel unnerved by what has unfolded this year and wish there was something you could do, let’s fix that. First you must acknowledge that you cannot change what is out of your control. And unfortunately a lot of what is going on in the economy right now falls into that category. Your time and energy are best spent on what you CAN control. So what can you do for your money during these turbulent times?
Create an emergency fund – This money acts as a safety net for you and your family. If you have an emergency surplus ready and available, you can accept the ups and downs of investing as it won’t have a major impact on your short-term cash needs.
Pay down any high interest debt – Compounding interest is great when it is working for you, but working against you it can add years to paying off your purchases. With rates on the rise you don’t want all your excess cash going to interest payments.
Add to your investments on an ongoing basis – Neither you nor I have a crystal ball to guide us on buying at the absolute market bottom. If you can add to your investments on a recurring basis you will be able to catch some of the ups and downs and smooth out the volatility.
Review your financial plan or projections – Money is nothing in itself, but when used as the tool to make your dreams possible that is where its utility is maximized. Checking in on your progress towards financial goals can provide peace of mind as to where you stand and if you are still on track.
Feel the feelings, but don’t stay in them – Being in a constant state of worry or stress is a lot for your mind and body to carry. You have every right to feel whatever it is that is coming up for you about your financial life. But then acknowledge that you have to let those negative emotions go because staying in them may cause more harm than good.
This year has been a wild ride to say the least. But investing still serves an important purpose in helping you grow your wealth. Acceptance of what you cannot control is key when it comes to your money. The good news, on the flipside there is also a lot you CAN do for your money. Stay focused on what you can control. And don’t forget about the possibilities, there are no limits on your money journey!
About the author
Kalee Boisvert has been in the financial industry for over 15 years, but her love of money started very young. Growing up in a single parent household, she watched her mom struggle with finances and wished there was something she could do to help. Today, as a single mom and financially independent woman, Kalee is called to support women in their financial lives. She felt the pull toward a career that would allow her to pursue this deeply personal goal to advocate for women and their money, which led her on the path to becoming a financial advisor. Kalee continues to create initiatives to grow a community that brings together financially independent women that are stepping into their worth as serious earners and smart investors. Kalee is also the creator and host of The Wealth and Wellness podcast – which brings together the important link between our net-worth and self-worth and has seen downloads increase by 30% per month. As a strong proponent of financial literacy, she writes articles on financial topics and has been published in Calgary’s Child magazine with her article called ‘Raising Money Savvy Children’. And appeared on the Global Morning show in Calgary to discuss ways to teach your children about money. Kalee has spoken on various panels including the Divorce Symposium and Women in ETF’s about investing and money topics. She has also been requested to speak for a variety of organizations and groups including the Young Women Lawyers Association, Articling Students Association, Young Women in Business, and Women in Energy on topics such as “Women Building Wealth”, “Investing for Success”, and “Money Mindset”. She is the sessional instructor teaching the ‘Investing 101’ course with the Alberta Securities Commission. And was recognized by Wealth Professionals as one of the 20 Rising Stars in Canada in 2020 and was the gold winner of the Young Achiever of the Year award. To further her efforts supporting financial literacy, Kalee has two books being released in 2023 – a children’s picture book called MoneyWise Mabel’s Bursting Bank, and a non-fiction book called Make Money Your Thing! Which aims to build confidence and empower people in their financial lives.
