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What to Know About the Markets Right Now

What to Know About the Markets Right Now

Well, this isn’t a lot of fun, this market volatility.

It’s a bit like turbulence on a flight. Uncomfortable, but historically not dangerous to your financial health.

Ellevest may be a new company, but we (I, and Chief Investment Officer Sylvia Kwan, and our team) have decades (and decades) of experience in investing. You may have seen Sylvia’s take on market volatility last week. Here are my thoughts:

Don’t listen to the pundits on the markets.

And especially don’t listen the pundits who tell you they know what’s coming next. They don’t. The economy, the markets, interest rates, politics, exogenous events that aren’t predictable: There are simply too many factors that can make the markets move for anyone to predict its near-term twists and turns consistently. That’s why fewer than 1% of “active managers” consistently outperform the market on a five-year basis.

Don’t even listen to the most confident pundits.

There is no correlation between how confident talking heads sound and how good they are at predicting the markets. None. But as humans, we’re drawn to confidence, like moths to a flame.

Finally, don’t listen to pundits who tell you why what just happened was inevitable.

Especially those saying jargony things like “stocks were priced to perfection.” (This one is just because those know-it-alls can get on your last nerve.)

The bottom line is that, in investing, there is a trade-off between risk (ie, the volatility we’re seeing) and potential returns: You can’t earn returns without risk.

(Wouldn’t it be great if you could invest money with an absolutely guaranteed return of 10%?? It doesn’t work like that.)

Instead, since 1928, the stock market has returned 9.5% annually. Over those 90 years, there have been 66 years with up markets and 24 years with down markets. And while it would be great to be invested in just the markets that go up, and avoid those that go down … again, it’s nearly impossible to get that right.

This risk/return trade-off has historically been worth it: In fact, women keeping most of their money in historically low-returning assets (like cash), instead of investing more of it in the stock market, has cost us historically over time. For some of our mothers, aunts, cousins … it cost them life-changing amounts of money.

But when women do invest, we have historically earned greater returns than the guys have. Why? Because we don’t trade as much, don’t panic as much, thus don’t pay as much in fees … and we have let the power of compound interest work its magic.

So what to do?

As with a flight through turbulence, try not to sweat the ups and downs.

And know that at Ellevest:

None of our investment portfolios is 100% invested in stocks.

We firmly believe in the power of diversification to reduce risk and provide a smoother ride. An example: Last week, the stock markets finished down ... but bonds had a really strong week; for two-year Treasury notes, it was the strongest week in two years.

We work to invest you in a reasonable amount of risk, based on the timeline you give us.

That means if you’re investing to buy a home in four years, we’ll put you in lower-risk investments, because we don’t want a market like this one to derail you. But for retirement, we will invest you more in stocks, because your longer timeline gives you the opportunity to ride out the ups and downs to earn the historically higher returns that the stock market has demonstrated.

Finally: How should you feel about these market downturns? The real answer is “pretty good.”

That’s because you’re still investing for your future; some two thirds of you* are doing so through recurring deposits with us. And so a market decline gives you the opportunity to invest in stocks at a lower price. (OK, feeling good about this can sometimes be easier to say than to do. But that doesn’t make it any less true.)

The numbers around investing regularly through up and down markets — and the impact it has historically had on investment portfolios — are pretty compelling. For example, if you invested in the stock market in 1929 (right before the Great Depression) and then stopped, it would have taken you more than 25 years to recover your investment. If instead, you had invested at the beginning of every year after that (thus, buying into the market at lower prices), it would have taken you less than seven years to recover. Even better for 2008: If you had invested at the market’s peak in late 2007 and then stopped, you’d have recovered in about five years; if you’d invested regularly, you’d have recovered in less than two years.

And know that we’re always here. You can always reach me at or our Concierge Team at

You can learn more here.



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