This past week has seen a number of great earnings reports from companies in the Freedom Portfolio, such as: Square (SQ), Teladoc Health (TDOC), and The Trade Desk (TTD). Teladoc has been especially impressive and had a pop of around 20% in the day after announcing earnings.

Unfortunately, part of that might be due to the bigger stock market story of this week: Coronavirus. Markets around the world are collectively freaking out over the possibility of a worldwide pandemic (a phrase which I think might be redundant, but I digress). Financial news outlets are freaking out and there’s a lot of talk about how the market drop this week is historic in terms of the sheer speed at which it has happened. In this environment, there’s one message I wanted to get across:

Don’t Panic.

At least, not when it comes to your investments. I’m not a doctor, and I have no special insights into infectious diseases or pandemics. Maybe the Coronavirus is particularly contagious and deadly and we should be incredibly worried about it. Even in that case, though, panic would seem to be counter-productive. If you are concerned, then educate yourself and take reasonable precautions, but please don’t panic.

While I’m not a doctor, I am an investor. I’ve been investing in individual companies for over 15 years. I was investing during the financial crisis of 2007/2008, when I saw the value of my investments get cut in half. I am not at all panicking right now and wanted to share with you all why.

But before we go any further, and while we’re on the topic of what I am and am not: I am also not a financial advisor. I can talk about my approach to investing and what I am feeling right now and planning on doing in the near future, but I don’t know about your specific situation. I’m years away from retirement with no money in the stock market that I anticipate needing in the next few years. Things might be different if I was planning to retire next year or had invested next month’s mortgage payment or was investing on margin. I hope you find the following insightful, but please don’t consider it to be specific financial advice for you.

First of all, let me be clear: While I am not panicking, it’s not because I’m not feeling any pain. Things have been pretty fluid the past few days, with the market routinely swinging from deep in the negative to slightly positive and back, but as of the time of the writing of this post, the Freedom Portfolio has lost tens of thousands of dollars in value this week.

That sucks. It almost certainly represents the biggest monetary loss I’ve suffered in a week in my entire life and I’m obviously not happy about it. But I also know this comes with the territory. The stock market historically has provided better returns than almost any other asset because of the volatility and risk involved. Pullbacks like this are not bugs, but are part of the system.

The S&P is down around 15% this week from the recent high. While the speed at which it has fallen (all in one week) is unusual, the magnitude of the drop is not. Historically, on average, the stock market sees a 10% drop every year or so and a 20% drop every 5 years or so. This drop puts us about on track for that. Do you remember the almost 20% drop the market had a little over a year ago in late 2018? I certainly do, because it coincided almost perfectly with the unveiling of the Freedom Portfolio. Within a week of announcing the Freedom Portfolio, I felt compelled to write a post called, “A rough start for the Freedom Portfolio – But I’m not worried” and the next day I wrote, “The Freedom Portfolio is down over 5% today – I’m not even thinking of selling anything“. In my first check-in, I noted that the S&P 500 was down 14% and the Freedom Portfolio was down 22%.

Yet that massive drop is basically forgotten now. In fact, even though the Freedom Portfolio was launched right before a massive drop and is currently in the midst of another one, it is still up 20%. Let me repeat that: Despite starting and ending at almost the worst possible times in the past 2 years, the Freedom Portfolio is still up 20%. That brings me to me next point:

Perspective Matters.

Yes, this week has sucked. But it’s just one week. Even with this large and sudden drop, the market has just gone back to where it was about 4 months ago. If you have any sort of long term investing horizon like I do, that’s not a terribly important length of time. I believe that any money in the market shouldn’t be money that is needed in the next 5 years. To get some much needed perspective, try taking a look at the 5 year chart of the S&P 500:

Yes, that’s still an ugly drop at the very end, but look at everything that precedes it. The past 5 years have been a bumpy ride with a few size-able drops, but it has also been an almost relentless march higher. The effect gets even more pronounced the further out you look. If you have a 5+ year investing horizon, which I do, then this drop should be accepted as part of the normal course of events and not something to panic over.

None of this is to say that the drop is over or that we’ve reached a bottom. As I mentioned before, during the Great Recession I watched my investments get cut in half over the course of a year and a half. During that time, I was putting as much money as I had into the market. I knew that, as somebody in my mid-twenties with a 30+ year investing horizon in front of me, those lower stock prices were a gift. Whereas others saw painful drops of net worth of 20% or more, I saw sales on companies that I felt confident would be worth much more 5+ years down the line.

The drop this week could be the start of another 50% crash, or the market could rebound next week and this could be a momentary blip that is forgotten months from now. I have no idea. Timing the market is not a game I even attempt to try. It is why I stay fully invested at all times and don’t carry cash to put to use during a downturn. I’ve been asked a few times if I have sold anything this week and my answer is always the same: “No, but if I did, it would be so that I could immediately use those funds to buy something else”.

I don’t know what the future holds, but I do know that I fully intend to stay 100% invested in the stock market for the foreseeable future.