Each month, Stoic partner Freddy Forger writes a short column in FiscAlert, the magazine with the smartest tips for managing money — essential reading for financial advisers and tax professionals. If you don’t have a subscription, you can read the column here. This month, Freddy explains why a correction is no reason to panic. Sometimes, it's even a reason to be optimistic.
At Stoic, we know from historical data that it has never taken more than ten years for a market crash to recover after any given entry point. So any money you don’t need for ten years or more can safely be invested in stocks. What does that mean now, after the current correction of around 20%?
Well, the lower the prices, the shorter the expected recovery time. The historical facts show that eight years is usually more than enough. So money you can miss for longer than that can still be invested in a globally diversified stock portfolio.
Still, staying completely stoic isn’t easy. After all, “It could drop even further!” And if it does, that person will be right — just as someone else who buys now and sees the market rebound will also be right. But both are just guesses. Not much different from a broken clock being right twice a day.
In the long term, one thing remains constant: the global economy grows. Stock markets follow. Not in a straight line, but in a jagged, unpredictable pattern. Sometimes it’s nerve-wracking. But always upward.
So: did you have a ten-year horizon, and now you have eight? Then this might actually be a logical moment to invest. As long as you stay calm afterward. Because a rational decision doesn't always feel good right away.