For those who love roller coasters, I’m sorry to say, I don’t share your love. With the resulting drops, heights, yanks, jolts, and screams, I’ve never liked it even though I’ve been talked into strapping into a coaster car more often than I want to admit.
So, why, for my entire investing career, have I told my clients that the Stock Market is just like a roller coaster? Why even get on if we don’t like it?
My answer to that question is simple: if we want to make more than inflation – which guaranteed accounts seldom do – we understand we must put up with volatility and uncertainty. In every case, we’ve instructed our clients that once we are belted in and things start to get scary, it’s not a good idea to make big changes or ask to be let off! Experience shows that it’s best not to look down. Eventually we recognize, that if we made wise, diversified choices in the beginning, followed by occasional improvements, all will be well.
At one time this analogy seemed like a good one. But, when it comes to “uncertainty”, there was one piece missing. In our normal outdoors roller coaster, we usually see what’s coming. We can know when to hang on or brace yourself. We know after we get strapped in and the car starts moving that we can’t pull a cord and make it stop!
Today, a better comparison seems to be Disneyland’s Space Mountain ride. On one of our Magic Kingdom vacations, my family encouraged me to try the futuristic covered coaster in the dark. The park proclaims it’s “fun”, but I feel it’s all the thrills without being able to see a thing that’s happening, outside of some flashing lights.
Doesn’t that sound more like the Stock Market?
So, how is it that we can watch people happily leave this coaster-in-the-dark, smiling and laughing, and some will say, “No Way”? Yet, we can handle the Stock Market unknowns without the same type of nausea and anxiety?
It’s simple. We have prepared ourselves. While no one in our office wants the economy to drop into a recession with a loss of 20% or more, we have learned to apply what we teach.
Now, if they turned on the lights and we could see where we were going, with all the sharp twists and turns, ups and downs, it might be easier to handle. If we could clearly see the structure of the stock market, the shape of the economy, know how it was going to react to outside influences, maybe we could see a little better what the future holds for us.
Over the past few years, we have been warning about the coming Recession and how to prepare and invest for it. Thirty years ago, recessions regularly came at an average of 3-1/2 years. Since the 1990’s we’ve seen recessions happen about once every seven years or so and they have intensified in strength; we’re able to see the market increase a lot more and longer; but the scary part is the market drops are often twice as steep.
At this time in mid-April 2025, some of the best analysts say it appears a recession is near, at least nearer than it used to be! Right now, the market has entered a full-blown correction, and some of the key averages have plunged into, out of, and may be heading back again to a bear market. That can really mess with our emotions. (See our blog in August 2024).
While you can’t ignore the twisting and turning emotional similarities of the market to riding a roller coaster in the dark, it is usually best to put into context the unseen yet expected gyrations, twists and turns, dizzying heights and white-knuckle downturns. Historically, when it comes to the stock market, what goes down, has always gone up, at least since the United States formalized its first market on Wall Street in 1792. Over a rolling 10-year cycle the stock market tends to be positive. There have been two times in the last hundred years, the Great Depression (in the 1930’s) and the Great Recession (2008 to 2009), that the market took longer to return a positive investment, taking up to 16 years.
Remember, the average recession lasts about 13 months. Meaning, when the recession is announced, the next six to nine months are expected to be the most turbulent. This suggests no one should make rash decisions with the uncertainty of today’s market. Depending on your age, income, personal situation and number of years left to work, your portfolio should be carefully designed to include some strategic, tactical and defensive investments. The majority of your positions should weather the recession’s storm very nicely, while providing opportunities and time for the remainder of your positions to recover. Just give it time to return to a semblance of stability. Keep your eyes open and remember that when you opened your account, you made the best decisions you could have made at the time. Remember that long-term strategic investing, while more volatile, usually makes more than trying to time the market.
Most individuals we’ve spoken to can understand and agree with the roller coaster analogy. For most of us, it’s scary whether you can see the upcoming changes or not. While it may be fun and thrilling, no one wants to be put at risk. Restraints must be kept in place. Experience teaches that moderation in all things is a wise decision. Your eventual success will be due to many factors, such as when you started a particular investment plan (was the market up or down); the outward conditions of the economy (which we have no control over); and your emotional and current financial state.
That’s why the initial interviews and discussions of expectations we have with clients are so essential. Every person we work with ends up with a different plan because their specific situation is unique and needs a unique approach.
Remember, create a plan for your portfolio. Implement the plan. Understand the context of the current market environment (ask questions from trusted resources as needed). Hang on for the ride. There will be twists and turns, but ultimately the goal is to have an enjoyable ride.