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MENTAL NOTE: S&P 500 Investors

The S&P 500 index plunged 4% on Wednesday in the market’s biggest one-day drop since June 2020.

This type of volatility can make investors want to run for the exits. But it also highlights why investing is a long game that takes patience and perspective. The market is filled with highs and lows—as well as periods of relative balance.

What’s going on? Right now, we’re in a low. The S&P 500 is down 17% so far this year, after rising an impressive 29% last year. The techy Nasdaq index is faring worse, down 27%.

What’s key to keep in mind? Having a long-term mindset can help you make more-informed investment decisions.

It’s tough to “time” the market — aka: deciding when to get in and get out — because no one knows when the best days or worst days will be. That’s one reason why investing regularly over time, or even using recurring investments, can be helpful.

What does this mean for investors? No one can predict the future, but historically, staying the course has often yielded the best results. For example:

  • Over the last 20 years, a hypothetical $1000 investment in the S&P 500 Total Return Index saw a 9.1% annualized return.

  • If you were uninvested during the S&P 500 Total Return Index’s 10 best days over the last 20 years, your returns went from 9% to 4.9%. If you were uninvested for the 30 best days, your returns fell to 0.2%. FYI: past performance isn’t a guarantee of future results, and all investing involves risk.

  • While the market has grown over time, it hasn’t been a smooth upward line. Just one example: the S&P 500 Index soared 37.5% over 1995 and plunged 37% over 2008.

Hypothetical example: Data from Robinhood using information from Bloomberg. Based on the S&P 500 Total Return Index April 29, 2002 to April 29, 2022. This is a hypothetical example and does not reflect the performance of any actual investment. Investors cannot invest in an index and it does not reflect the deduction of fees or other trading expenses.

Days like today reinforce that investing is for long term savings. — money you don’t immediately need, but that could help you build a better future over time.

Down cycles are a natural part of being invested in the market. To avoid making

emotional decisions, stay focused on your long-term goals and keep it all in perspective.

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