The Carr Report: Should I continue to invest in this volatile market?

by Damon Carr, For New Pittsburgh Courier


Hi Damon, I’ve been looking at my 401(k) balance. I noticed it’s been down. I was wondering if I should continue to invest in this volatile market. I currently contribute 4 percent to my 401(k) plan at work. I’ve accumulated a respectable six-figure balance. My company matches me dollar for dollar up to 6 percent. I had planned on increasing my contribution to 6 percent next year to get the full match. After watching this market volatility and observing my 401(k) taking a hit, I’m thinking I should stop investing altogether. Please advise?

~ Vivian




Should you stop investing in this volatile market? Answer: Absolutely NOT!! Let me ask you a question. If Apple, Microsoft, Costco, Harley Davidson, Polo, Whole Foods, McDonald’s, or Coach, etc., decided to mark down all of its prices on all of the products they sell, would you stop buying their products?

I had an opportunity to ask Vivian that question in person. Her response was, “No. As a matter of fact I continue to purchase their products now even though the prices are going up.”

I responded, “My point exactly! It befuddles me that people look for sales all day, every day. Yet the stock market is the only market where when items within that market go on sale, instead of buying more of its quality products at a discount, people contemplate stopping buying altogether.

Here’s the irony; the same products and services that we continue to purchase at inflationary prices in a volatile stock market are manufactured by the companies represented in the stock market. We’re OK with buying and consuming the products and services they create but we’d rather pause on continuing to invest and build equity in these companies. That, dear friend, is hustling backwards.

I understand the mindset behind a person contemplating wanting to stop investing in a bear market (falling stock prices) coupled with an inflationary economy (rising prices). On one side, inflation creates an environment where you have less discretionary income or money left after you pay bills and purchase necessities because of the increase in prices. When the money is tight, you look for ways to create more wiggle room in your budget. Inflation also poses an imminent threat of potential job layoffs. The idea of being laid off from your job makes a person want to cut back and save money. You’re staring this reality in the face while at the same time, you’re looking at the balance on your retirement portfolio being down 10 percent, 15 percent, or even 21 perent depending on the day. The answer to increasing wiggle room within your budget, thus allowing you to save and conserve money while at the same time mitigating your losses within your retirement portfolio seems obvious—stop contributing to your retirement plan. But is it a good idea?

All of the companies that I mentioned earlier in this article including Apple, Microsoft, Costco, Harley Davidson, Polo, Whole Foods, McDonald’s, and Coach are companies included in the S&P 500. The S&P 500 or Standard & Poor 500 is a pool of 500 stocks composed of 500 of America’s biggest, best and brightest companies representative of 11 different market sectors. It represents approximately 80 percent of the total stock market. The S&P 500 Index is the most commonly referenced index used amongst the media and financial advisors regarding the stock market. When you hear that the market is down, they’re usually referencing the S&P 500 Index.

The stock market has averaged a 10 percent annual rate of return over the last 100 years. The stock market has made more millionaires than the lotto. What’s interesting to note is although the market has an average rate of return of 10 percent, it’s never earned 10 percent in any one given year. The stock market is and has always been volatile. In some years the stock market has earned 20 percent or more. In some years the stock market has been down 20 percent or more. But over the course of time, the market has averaged a positive 10 percent annual return. If you were to analyze any 5-year, 10-year, or 20-year rolling period, you’ll learn that in each successive rolling period, the market has always earned a positive rate of return. On top of that, it’s worth mentioning that the stock market is the best performing asset class. No asset class has done better including real estate, bonds, gold, silver, art, etc.

You mentioned that you have a respectable six-figure retirement portfolio. That tells me that you’ve been investing for a long time. You’ve already experienced several market downturns including 2008 when the stock market plummeted 48 percent as a result of a fiasco associated with mortgage loans granted to people with bad credit. Yet here you stand today with a respectable six-figure retirement portfolio because you stayed the course. 

Should you stop contributing to your 401(k) plan, your employer will stop matching your contribution. That’s a 100 percent return on your money from the gate.  Even with the stock market being down nearly 17 percent at the time of writing this article, that’s nothing compared to the 100 percent return you’ll lose from your company’s match.

There’s evidence that long-term, 5 years or more, you have a high probability of having a positive return on your investments. It’s a fact that social security in and of itself isn’t sufficient to adequately provide for your needs in retirement. It’s a fact that most companies have opted out of providing pensions to their employees. In order to have a respectable retirement you have to build a respectable retirement portfolio which you are in the process of doing.

If things are tight and you’re looking to increase your discretionary income, I encourage you to find other ways to create extra wiggle room in your budget. Look to cut back on lifestyle expenses as opposed to retirement savings.

(Are you looking to Beat Debt, Boost Your Savings, or Make Good Financial Decisions? Contact me.  Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website @

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