Context
The stock market globally took a bit of a correction this week, fueled primarily by the US Fed hinting that they may raise interest rates much sooner than anticipated to curb the level of inflation.
Interest rates go up, savings accounts look more attractive, borrowing becomes more expensive, potential future earnings from companies lower and the stock market turns down a bit.
This happens on and off over every period of history you look at and is completely normal.
It's all part of the business cycle of life.
The newspapers this week are already wheeling out the words 'pummeled,' '$X billion hit' and so on - it sells papers
But let's look in context at a 20 year Australian Share market graph as we are long term investors.
Nothing out of the ordinary or that we haven't seen before.
The long term trend is always upwards as a) populations rise so consumer numbers increase and b) inflation means companies will always increase their prices over time.
How do we use this recent news positively - let's split us into two groups
Accumulators (pre-retirees): Your regular employer super contributions and personal regular savings are going to be buying holdings in the great companies of the world, companies that will still be around long into the future, at a 10% discount to their market value in August last year.
If you make extra monthly contributions to your plans or were drip feeding in a lump sum, you are getting much more for your money now. You may wish to increase your contributions. These are units of the global economy that will sustain your lifestyle way into the future. If you have cash on the sidelines, you were thinking of investing, we should have that discussion.
Retirees: Whilst it's not nice to open our accounts and see them worth less, this has happened at a time when you will likely have received the January dividends from several of your funds. Your cash accounts within your pensions will be full and you won't be having to sell any units of these shares for a while. They have time to begin their inevitable rise again.
We purchase and use items from the stockmarket every day. Toothpaste, petrol, electricity, entertainment etc.
The only time we need to worry about the stockmarkets long term returns is if we and everyone else on the planet stops consuming. It's simply not going to happen.