An Important Read Before the Holidays

An Important Read Before the Holidays

Before you get too caught up in festive plans, we wanted to share something important with you—one of those pieces that’s worth a quiet five minutes with a cup of tea (or mulled wine!).

The past couple of years have reminded us just how much can be achieved when things are going well. Yet, as we all know, Investment markets naturally have their ups and downs, and it’s in those challenging moments that calm heads and clear plans truly make the difference.

Think of this as your lifeboat drill. Staying steady and confident when the seas get choppy ensures you’re ready to sail through whatever comes next.

The Permanent Challenge of Temporary Declines

Investment markets have always tested investors’ resolve, and the last few years have been no exception. Despite an uneven global economic recovery, markets have delivered a mix of surprises, with moments of optimism frequently overshadowed by concerns around persistent inflation, geopolitical tensions, and interest rate hikes. As we step into 2025, many clients and investors may feel cautious, if not outright worried.

And who could blame them? After all, the financial media revels in making us think the next market dip spells doom. But before you run for the hills (or stash your cash under the mattress), let’s pause and unpack a few evergreen lessons about market declines—lessons that are as important now as ever.

What You Should Know

A market correction is officially defined as a 10% drop from a market peak. Sounds dramatic, doesn’t it? Yet these corrections are about as common as birthdays—happening almost annually. Over the past 50 years, the average yearly decline has been around -14%. Here’s the kicker: despite those drops, about 75% of those years still ended with markets in positive territory.

Think of 2022 as a refresher course on volatility. After a relatively calm 2021, the markets reminded us that they don’t move in straight lines. Rather, they follow a generally upward trend punctuated by temporary setbacks. These setbacks—let’s call them wobbles—are simply the cost of being in the game. Every five years, on average, we’ll see declines of 30% or more. The last one? March 2020.

While some believe they can predict these fluctuations (spoiler: they can’t), history shows that successful investing isn’t about timing the market but rather spending time in the market.

As the Press start to make their predictions over the coming weeks—this area will do well, that stock/fund will soar, this fund manager predicts this market with do x and y …..remember, when our peers and others have looked back at these predictions, over 90% are wrong, the newspaper/journalist just doesn’t report back on last year’s prediction – where is the fun in that…….

How You Should React

It’s perfectly natural to feel uneasy when markets dip. It’s your survival instincts kicking in. But here’s the thing: the stock market isn’t a hungry lion chasing you down—it’s a complex system that rewards patience. Reacting to temporary declines by pulling out of investments almost guarantees one thing: locking in losses.

Instead, we encourage you to lean into the long game. Temporary declines are just that—temporary. Remember, the next 30 days are irrelevant to your 30-year financial plan. Staying invested means you’re playing a different game than the day traders glued to their screens. You’re playing to win, not to survive the next headline.

The markets have an incredible track record: three positive years for every negative one. Those positive years reward you for staying put during the negative ones. You don’t get the permanent upward returns without the occasional temporary dip—it’s the price of admission to a lifetime of growth.

Time Is Your Ally

As Warren Buffett famously said, “The stock market is a device for transferring money from the impatient to the patient.” So, take a deep breath. If you’re still building your portfolio, these dips allow you to buy more shares at a discount. For those nearing or in retirement, it’s about sticking to the financial plan designed to weather these storms.

Patience and rationality under uncertainty are key ingredients for success, not just in investing but in life. By focusing on your plan—rather than reacting to market noise—you’re positioning yourself to benefit from the long-term growth that markets have historically delivered.

While no one can predict where the markets will be in six months, we can confidently say where they’ll be in 10 years: higher. Time heals all market wobbles, and your job is to make sure you’re still standing when it does.

How Can We Help?

At Penguin, we’re here to guide you through the highs and lows. If you’re feeling uncertain or just want some reassurance for the New Year, give us a call. Together, we’ll keep your plan on track—because investing is a journey, not a sprint, and we’re with you for the long haul.

But please remember, the Penguin Team will be off enjoying some well-deserved time with family (and enjoying a few mince pies) from 2pm on 20th December until 8.30am on 2nd January—ready to hit the ground running and help make 2025 your best year yet.

If you need us before then, reach out now. We’re always happy to help.