Bear Market Means Stock Market Discounts

July 22nd, 2008  |  Published in Investing  |  3 Comments

I you’re a young investor, with decades before you’ll need the assets in your retirement portfolio, this bear market should make you happy. While it’s difficult to swallow the losses your retirement account has made, think of it as a 20% discount on what you’ll be buying over the next few years rather than a 20% loss of the assets in your retirement account.

Since the high in the market last October, my retirement accounts have lost thousands if not tens of thousands. It’s hurt. But, I’m only 27, nearly 28, and with another forty years of retirement saving left in me it’s actually a positive that the market has gone down. As much money as I may have in my retirement assets now, I doubt I’ve even contributed 10% of what I will eventually contribute towards retirement. The 20% discount young investors are now getting, which will benefit the 90% of retirement savings we have yet to do, outweighs the 20% loss we’ve experienced on the 10% we have contributed.

It wasn’t until today that I full appreciated what all those investment magazines and books had said. A broad market decline is good for young investors, bad for poorly diversified older investors nearing retirement, and now I actually believe it.

How will this change my behavior? It won’t. I still make my regularly scheduled contributions, though rebalancing will be a little more active the next time we look at it.

  

Responses

  1. Gale Whitaker says:

    July 22nd, 2008 at 10:18 am (#)

    Peak oil is going to blow you out of the water my friend. The stock market will be down considerably in 40 years.

  2. Diana says:

    July 22nd, 2008 at 7:22 pm (#)

    You’re not planning to retire early? I figure someone as young as you who’s already started saving for retirement so aggressively would plan to retire around 55 or so. Both of my parents retired from teaching at 55 and are loving it so that’s my goal, too. My husband and I are only 32 but have saved well over 6 figures so far. (*brag brag*) But our goal has always been to not have to work unless we WANT to after age 56. So we do without now to be able to live freely later.

  3. retirehappy says:

    July 23rd, 2008 at 6:57 am (#)

    I certainly hope to retire by then but you prepare for the worst, right? 🙂

    Having saved six figures by 32 is awesome, hopefully it’ll be seven figures soon and you’ll be ready for retirement by 45. 🙂