A lot of people are stressed out about a lot of things right now. Markets are down. Prices are up for many of the things you need to buy. Interest rates are rising and make it a confusing time to consider buying or selling a house, or making other major financial decisions. This all adds to the stress yo may be feeling about your job, the ongoing pandemic, and the health of loved ones.

If you’re stressed out about what is happening right now in the stock market, there is a better way to invest.

This isn’t about a way to guarantee you a higher return. (For the record, if anyone guarantees you a higher return, stop reading that article or end that Zoom call). This is about having a plan for ho you invest. It should prepare you for times like this when the market quickly falls. It should also prepare you for when the market quickly goes up (like it did right after the pandemic started). It should be a plan that lets you stay invested for the long term.

When choosing how much you want invested in stocks, balance the regret you would feel when markets go down with the regret of missing out when things turn around.

But this plan is not the same for everyone. Because each of us is in a different situation. Different people can stomach different amounts of risk. That’s based on what our goals are, how our brains are wired, and what we have lived through. When my dad died, I went to the small bank in the Kansas town where he’d lived and found a stash of cash in his safety deposit box. He had lived through the Depression. That was a time of defation. Keeping cash in the safety deposit box was what he needed to feel safe, based on the life that he lived. That’s not my plan, but it was his.

Everyone is different.

Yet everyone faces the same ups and downs in the public markets. So what’s your plan?

• First, answer the question, “Why are you investing?” It’s not a plan if there aren’t goals. If you want to retire in 30 years, you may be able to bear more risk in order to maximize the growth of your portfolio than you would if you hope to retire in three years.

• Then, determine what balance of bonds and relatively more risky stocks is comfortable for you. If you reduce the percentage you have in stocks, you may feel better when markets go down, but you have to balance that with feeling like you’re missing out during times when the markets go up.

• Focus on controlling the things that are in your control—like saving more and spending less.

If you find yourself tempted to make a change, think carefully about whether you’re moving from one long-term plan to the next long-term plan. Trying to time short-term moves has more in common with gambling than with long-term investing plans When I look back over my past 50 years as an investor, I can make a long list of all the shocks that made markets go down. People are talking about high interest rates now. I remember in the early 1980s buying an apartment in Brooklyn with a loan that had a 15% interest rate. I didn’t like it, but I didn’t have a choice, because I needed a loan if I wanted to buy that apartment.

We have to accept that these shocks will happen. We should prepare for them rather than try to predic them. This time there is inflation, fear of a recession, a war in Ukraine, and increased volatility. We don’t know when this will end. We also won’t know exactly what will cause the next shock or when it will occur. The only thing I can guarantee is that it’s going to be a surprise (because if it weren’t, the market would have priced that in).

As a long-term investor, here’s the good news: You can capture the returns of the market without havin to accurately forecast (which is great, since almost no one is consistently good at that). So in times like this, when stock prices go down, the market is setting prices so shares will have a better return and attract buyers. When you see a big drop, prices are lower so that, going forward, the people who buy have a greater chance of having a positive outcome.

That doesn’t feel great if you bought Netflix in the last couple years, but that’s why I don’t encourage people to buy individual stocks. I love that people can easily diversify and spread out their risk. When choosing how much you want invested in stocks, balance the regret you would feel when markets go down with the regret of missing out when things turn around.

When you can be a long-term investor and think in terms of decades rather than years, you have the greatest chance of capturing the power of compounding. Those little extra gains add up over time. It helps explain why over the past 95 years (including all those shocks that have happened), the return for the general stock market has been around 10% a year.1 Markets rarely return 10% in any one year, but over time, long-term investors have been rewarded with that longer-term average. I think that’s amazing. But I also know it’s tough to stick it out. Because it means that you have to get through these tough times, even when the market is going down and down.

I don’t like to tell people what to do. I never told my dad what he should do. But I do want to help. I know how stressful this can be. I have always tried to share my perspective on investing with the hope that it can help people be long-term investors who have the greatest chance of meeting their goals. I know that right now is tough for many people. But I have seen over my career how many people have benefited from creating a plan that made sense to them and that they could stick with. It’s not always easy, but it’s the best option I know of.

And it’s never too late.

So what’s your plan?

1. In US dollars. S&P 500 Index annual returns 1926–2021. S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All
rights reserved.

 

Diversification does not eliminate the risk of market loss.

The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or representation as to accuracy or completeness.

Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional to be reliable and Dimensional has reasonable grounds to believe that all factual information herein is true as at the date of this material. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. Before acting on any information in this document, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations.

Unauthorized reproduction or transmitting of this material is strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein. This material is not directed at any person in any jurisdiction where the availability of this material is prohibited or would subject Dimensional or its products or services to any registration, licensing or other such legal requirements within the jurisdiction.

“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd, Dimensional Japan Ltd. and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

Risk
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.

UNITED STATES

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.

CANADA

These materials have been prepared by Dimensional Fund Advisors Canada ULC. The other Dimensional entities referenced herein are not registered resident investment fund managers or portfolio managers in Canada.

This material is not intended for Quebec residents.

Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or other distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

AUSTRALIA

This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material refect our judgement at the date of publication and are subject to change.

NEW ZEALAND

This material is issued by DFA Australia Limited (incorporated in Australia, AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. This material does not give any recommendation or opinion to acquire any financial product or any financial advice product, and is not financial advice to you or any other person. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and for the Dimensional Wholesale Trusts the target market determination (TMD) that has been made for each financial product or financial advice product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.

WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED

Issued by Dimensional Ireland Limited (Dimensional Ireland), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland.

Dimensional Ireland is regulated by the Central Bank of Ireland (Registration No. C185067).

WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.

Issued by Dimensional Fund Advisors Ltd. (Dimensional UK), 20 Triton Street, Regent’s Place, London, NW1 3BF. Dimensional UK is authorized and regulated by the Financial Conduct Authority (FCA) – Firm Reference No. 150100.

Dimensional UK and Dimensional Ireland do not give fnancial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a fnancial adviser helps you with that decision.

Dimensional UK and Dimensional Ireland issue information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from Dimensional UK and Dimensional Ireland will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.

NOTICE TO INVESTORS IN SWITZERLAND: This is advertising material.

JAPAN

For Institutional Investors and Registered Financial Instruments Intermediary Service Providers.

This material is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. Dimensional Japan Ltd. Director of Kanto Local Finance Bureau (FIBO) No. 2683

Membership: Japan Investment Advisers Association

SINGAPORE

This material is deemed to be issued by Dimensional Fund Advisors Pte. Ltd., which is regulated by the Monetary Authority of Singapore and holds a capital markets services license for fund management.
This advertisement has not been reviewed by the Monetary Authority of Singapore, and should not be shown to prospective retail investors.

FOR PROFESSIONAL INVESTORS IN HONG KONG

This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not intended to constitute and does not constitute marketing of the services of Dimensional Hong Kong or its affiliates to the public of Hong Kong. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.

Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors.

Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.