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The Only Investment Advice You'll Ever Need

It's hard for people to stick with their investment plan during turbulent times, such as the Brexit vote.


When the stock market is down or gyrates wildly like it has this year, investors get nervous. They often feel the need to do some research on the Internet, or read a new book about the stock market, or study some new investment philosophy. I'm here to tell you the one thing you really need to know.

See Also: What Brexit Means to U.S. Investors

The market goes up, and the market goes down. Over the long run, however, historically it has always gone up. Sometimes it dives more than expected, as it did in 2008 and 2009. But even then, it did go back up eventually.

If you have the fortitude, resilience and courage to stay focused on a long-term perspective, you will succeed as an investor.

Consider the following examples:


The Great Depression

A hundred thousand dollars invested in Standard & Poor's 500-stock index in 1928 was worth only $50,660 in 1932. Imagine your account dropping almost 50% over four long years. The country was experiencing the greatest economic slump of the 20th century. Unemployment hit almost 30%. People panicked, thinking, "I don't want to lose my remaining $50,000." They sold their equities and went to cash at the exact wrong time.

The problem with that decision was that it turned a temporary downturn in stock prices into a realized loss. Yet, an investor who decided to give the market four more years was rewarded with an account valued at $145,380 in 1936.

If you had the courage to buy low in 1932, your new investment almost tripled in four years.

Source: Federal Reserve data base in St. Louis (FRED)

The Great Recession

The example that still haunts most investors today is the stock market meltdown of 2008-09. A hundred thousand dollars invested in the S&P 500 at the end of 2007 was only worth $63,000 by the beginning of 2009.


We all remember the financial panic that ensued.

My advice then to clients and prospective clients alike was to "stay the course," "focus on the long term" and "it is a great time to buy low."

I am so grateful that the majority of my clients had the tenacity to stick with the plan and stay focused on the long term. It was not easy, but it was the smart thing to do.

Those folks that went to cash locked in their losses. An investor that decided to give the market more time was rewarded with an account valued at $165,710 at the end of 2015.


If you had the courage to "buy low" at the end of 2008, you would have initially regretted the investment. The market dropped an additional 28% in the first quarter of 2009. However, by the end of 2015, that seemingly ill-timed investment would have almost tripled.

Source: Morningstar

Today's Market

Investors want to know what to do in light of the recent attack in Orlando, Fla., and the Brexit vote. My answer: Stick with the plan, and stay the course.

I realize that this simple advice during turbulent times is very difficult to grasp. Clients want me to "do something." However, choosing to stay focused on the long term is doing something. In the long run, it can work. If you can do it, you have the potential to be a successful investor.

See Also: The Impact of the Brexit Vote

Greg Hinkson is the CEO of Hinkson Financial Services and a Certified Financial Planner™ professional. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a Registered Investment Advisor.

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