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Brett Arends's ROI

Sept. 24, 2022, 1:12 p.m. EDT

Don’t panic about your 401(k)

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By Brett Arends

I’ve been doing this—writing about the stock market and investments—for a quarter of a century. It’s been a heckuva turbulent ride, including Russian defaults, emerging market crises, dot-com disasters, terrorist atrocities, global financial meltdowns, a U.S. housing collapse that rivaled the Great Depression, inflation panics, deflation panics, energy crises, sovereign debt crises, and a global pandemic.

Through all that time I have been reassured, time and again by some Very Wise People, that the world was coming to an end.

Read: What is a bear market? S&P 500 slides more than 20% from peak, confirming the end of its pandemic bull run

And after all of that, here’s what the whole, long saga has taught me—often the hard way—about turmoil like this.

The people who panic and sell the stocks in their retirement portfolios right here will end up kicking themselves. Maybe not this week, this month, or this year. Maybe not even for a couple of years. But eventually, and big-time.

The people who take advantage of this crash by investing more long-term money will end up patting themselves on the back. They might feel like chumps at first, for weeks, months or even years. But eventually they will be thankful. (And they will forget, by the way, that they ever felt like chumps.)

Read: If you’re at least 10 years from retirement consider a portfolio of 100% stocks

The people who try to be really clever about it will end up doing worse than the people who keep it simple and don’t overthink it. The further you are from Wall Street, the better you’ll do. The “dumb” money—or, more accurately, the simple money—will beat the “smart” money.

Take these observations or leave them, as you wish.

This relates only to money you don’t need for five years or more: Retirement funds, college funds and so on.

We have had more financial chaos during my quarter-century in this business than at any time in recorded history. Sure, the 1929-32 Wall Street Crash was deeper, but we’ve had the bear market of 2000-3, when stocks effectively halved, the global financial crisis of 2008, ditto, the Covid crash of 2020, when markets cratered in a few weeks, and many more besides. When I began my career, a giant hedge fund had just imploded, sending global markets into a tailspin. The hedge fund, Long-Term Capital Management, was run by Wall Street people so allegedly brilliant that some of them had Nobel Prizes (albeit only in economics, which hardly counts).

The cause of the crisis? Oh, Russia. Turns out it was an unstable country with an unstable president. Who knew?

I remember the first dot-com crash, and tech was supposedly finished for a generation. Then there was 9/11, and we were going to be haunted by perpetual terrorist attacks. No one was going to live in New York any more, no one was going to build another skyscraper, no one was ever going to get on an airplane.

The 2007-9 financial crisis was the worst since the 1930s.

In 2009 Dubai had to be bailed out by one of its neighbors.

In 2011 America’s national debts were so high, and our political system so dysfunctional, that Treasury bonds were downgraded by the ratings firms for the first time ever.

From 2011 through about 2014 the continent of Europe was racked by a debt crisis so bad that it was absolutely, positively, 100% guaranteed to break up the entire European Union and destroy the euro.

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