5 Smart Moves to Secure Your Financial Future While Riding the Market Rollercoaster
As we careen into the 4th quarter, most people are feeling a little nauseous
The stock market hit new highs the other day.
This was after the market looked like a bar brawler that had been beaten senseless at the beginning of August and September. There was blood all over the place, and investors were running for the exits. The end of the world was nigh.
The market is so turbulent that it’s enough to make you want to go back to bed, pull the covers back over your head, and hope you can sleep through all the noise.
But hold on for a second. We’ve got something neither our parents nor our kids have—experience. Gen X has lived through more financial ups and downs than any other generation can claim.
We’ve witnessed the dot-com bubble, the housing crisis of 2008, and most recently—the pandemic-induced market chaos.
And guess what?
As Billy Joel sang - we’re still standing. (I know I heard you sing in your head, “Yeah. Yeah. Yeah.”)
Gen X has always plowed through the hard times, so let’s use that experience.
Here are five smart, actionable moves to help you survive and thrive in this unpredictable market.
Spread your bets, spread your wealth
Everyone was big into mixtapes when I was growing up.
My mixtapes were pieces of crap that were recorded on a boombox around the radio commercials and the yappy DJ. But the nice thing about those tapes was that there was a creative mix of music that I enjoyed.
This philosophy can protect you in the markets—it's called diversification. If you can mold your investments into a well-produced mix of industries, you can sleep at night without worrying about the market's trend. If you can count the number of investments you have on one hand, you probably need to rethink your investment strategy.
“For twenty dollars I can tell you a lot of things. For thirty dollars I can tell you more. And for fifty dollars I can tell you everything.” —Madame Ruby in Pee Wee’s Big Adventure
Note that I used the word “investments”—your portfolio could look beyond the usual stocks and bonds. REITs (real estate investment trusts) are a good way to invest in real estate without plunging toilets for tenants at four in the morning. Some interesting avenues you can look into are annuities and insurance vehicles like Variable Universal Life (VUL) policies that could bring you steady income in your later years.
Whatever you decide, you shouldn't just throw money at whatever the talking heads on CNBC are suggesting now. See a financial advisor that can help you build a well-rounded portfolio. They can work with you on the correct allocations to help you weather the market downturns.
Ride the market waves with dollar-cost average surfing
If you're trying to time the market you may be getting more grey hairs than you already have.
There are basements full of hedge fund nerds who are trying to figure out where the next bull or bear run will start, and they rarely get it right. It's like trying to get those concert tickets by waiting in a Ticketmaster queue—it's impossible to predict, and there's no real formula behind how you get those tickets.
There's a concept called dollar-cost averaging. Regardless of what temper tantrum the market is throwing, you're investing a fixed amount at regular intervals. This solves the problem of obsessing over the perfect time to buy or sell. It's like putting your portfolio on cruise control.
I don't give a frog's fat ass who went through what. We need money! Hey, Russ, wanna look through Aunt Edna's purse? —Clark Griswald in National Lampoon’s Vacation
An easy way to think about this concept is that you are putting that favorite music track or album on repeat. You don't have to do anything - you just let it play... over and over again. This strategy works over time and averages out your investment costs. You buy more when prices are low and fewer when prices are high. This avoids the stress of predicting when to time the market. Plus, this approach is backed by data (find the data).
What's a scenario that illustrates how this worked? A Fidelity study showed that Gen Xers who stayed invested during the 2008 financial crisis (rather than panic-selling) saw their portfolios grow by an average of 10% per year over the following decade.
This shows that patience does pay off, but only if you have a plan and stick to it.
Silicon Valley smarts for your savings
“Robo-advisor” is becoming a more common term, but many Gen Xers think it’s some millennial tech gimmick.
Having a robo-advisor isn't the way that I manage my portfolio. Heck, robo-advisors weren't around when I started a relationship with my advisor 16 years ago. But, they could be the next evolution in personal finance. For Gen X, it could be a timesaving tool for those who don't want to evaluate investment strategies but want to feel like they have an active advisor.
“I'm sorry Dave, I can't do that”—HAL in 2001: A Space Odyssey
So, how do robo-advisors create their investment strategies? They look at your risk tolerance and what you've input for your financial goals and use algorithms to build and manage a diversified portfolio. The draw is that they are low-cost, efficient, and never sleep, and Gen X turned to them to manage their investments at a rapid rate.
A 2023 survey found that Gen X adoption of robo-advisors grew by 43% last year, so this technology might be the time-saving financial tool you’ve been missing.
Time in the market beats timing the market
Paul Samuelson is an economist who says good investing is like watching paint dry or grass grow.
For long-term investing, this is the kind of patience you need. If you're trying to get rich quick, the volatile stock market can eat up your cash, and you'll not see any gains. But if you just set your mind that you are investing over many years, it's reassuring. Don't worry if you haven't started investing yet—you still have time. Don’t listen to those naysayers who say it's too late to invest.
“One minute you’re up half a million in soybeans and the next, boom, your kids don’t go to college and they’ve repossessed your Bentley.” —Louis Winthorpe III in Trading Places
If you don't think time works in your favor, let's do a quick exercise. The youngest Gen Xer is 43, and if they were to start investing $500 a month at that age (assuming a 7% annual return), they could have over half a million dollars by the time they’re 65. No matter what your financial situation looks like, it all gets evened out when you use consistency and time to your advantage.
Small, regular investments can grow substantially over time if you leave them alone and do not actively trade them. The biggest mistake most people make is underestimating the power of compound interest.
Zen and the art of portfolio maintenance
Experts said that if you want to alleviate anxiety you shouldn't look at your portfolio every day.
I'm going to offer you some counterintuitive advice.
Review your portfolio every day. Why, you ask? Looking at the numbers every day will desensitize you to the market's ups and downs. It's like eating too much of your favorite food—if you eat it every day, you'll get sick of it.
After watching the market for 90 days, you'll shrug when it throws a tantrum. You'll also see patterns as the market reacts to news, and you'll see that it's pretty much irrational.
“I am serious, and don’t call me Shirley.” — Dr. Rumack in in Airplane
The key words here are “watch the market.” You don't need to trade every day in the market—you probably won't beat it.
If you feel the urge to trade, talk to a financial advisor for a second opinion.
A 2022 study found that investors who obsessively checked their portfolios (daily or more) had returns that were 7% lower than those who only checked in once a month. But they were trading—if you don't trade and you hold the line, you'll be better off.
Closing thoughts
As a final note, I want you to consider this—Gen X is in an excellent position right now.
We’ve got several more years left in the market than the Boomers and more life experience than the Millennials. Our generation knows how to adapt and has built resilience through every economic storm.
The next time the market decides to drop 500 points in a day, remember that you’ve seen worse. If you have a smart strategy in place, you’ll thrive in the future.
Our best investing years are still ahead of us.
Hasta la vista, baby!
With the Dow around 42,000, I feel like 500pts isn't much of a blip anymore. My ears prick up around -800, and if it hits 4 figures, I see if there's any "couch change" hanging out uninvested (I never set up DRIPS). Worked for me on August 5!