In 2002, the Dow Jones Industrial Average (DJIA) was in the middle of a nasty bear market, down 35% from its peak brought on by the dot-com bubble.
In this same Coffeehouse newsletter twenty-one years ago, I highlighted the following passage taken from The Economist magazine:
“. . . in other words, you ain’t seen nothing yet. These trends suggest that anyone who assumes the United States is now at the zenith of its economic power is making a big mistake.”
Back then the DJIA was trading at about 8,300. Today it is closer to 34,000, an annualized return of over 8%.
Twenty-one years from now, I’m guessing the same index will be a lot closer to 100,000 than its closing price of today.
Why am I sharing this with you? Because sometimes it is hard to stay committed to your financial plan amid rampant inflation, pending recessions, bank failures, pandemics, regional wars around the globe, and political acrimony on the domestic front.
You connect with the three Coffeehouse Investor principles because you inherently know them to be true.
- Don’t put all your eggs in one basket. Diversify your assets to maximize your chances of reaching your financial goals with a minimum amount of risk.
- There is no such thing as a free lunch. Because markets are efficient, maximizing returns is best accomplished through low-cost index and passively managed funds.
- Save for a rainy day. Developing a long-term financial plan, with an eye on your saving and spending, is essential.
Take this market downturn as an opportunity to inspire the younger generation in your life.
Introduce them to our three principles as they pursue their richer life in the years ahead. Then share with them this article written last week by New York Times columnist David Brooks, “The Power of American Capitalism.”
Together we are changing what smart planning and investing look like. One investor at a time.
Simplify Your Approach
Let's create a financial plan that maximizes your returns and minimizes your tax impact while staying committed to your goals. If you have $1 million or more of investible assets and are in or close to retirement, let's connect on a call and strategize a plan.