World War 3: How To Prepare Your Money (Do This Now)

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In times of global unrest, when headlines scream of conflict and markets gyrate wildly, it’s natural to feel anxious about your financial future. However, history shows that panic-driven decisions, especially in investing, often lead to costly mistakes. This article draws on historical data and timeless financial principles to guide you through turbulent times, emphasizing the importance of staying calm, staying invested, and staying smart.

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The Reality of Markets During Crises

When global conflicts arise, fear dominates the news cycle, and markets often react sharply. However, historical examples demonstrate that markets are more resilient than we might expect:

• Pearl Harbor (1941): The stock market dropped approximately 3% the day after the attack but fully recovered within a month.

• Cuban Missile Crisis (1962): During this tense period, when nuclear war seemed imminent, the market fell about 7% over four trading days but rebounded in just 10–12 days.

• Russia-Ukraine Conflict (2022): The S&P 500 dropped 2.6–6% on the day of the invasion, yet within a month, it was trading higher than pre-conflict levels.

These examples highlight a key point: markets hate uncertainty more than bad news. Once the uncertainty of a crisis resolves—even if the outcome is negative—markets tend to stabilize and recover. This pattern suggests that selling in a panic during a crisis often means missing out on the recovery that follows.

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Lessons from Past Market Crashes

Beyond wartime, other major crises reinforce the resilience of markets:

• 2008 Financial Crisis: The S&P 500 plummeted nearly 57% as banks failed and homes were foreclosed. Yet, those who stayed invested saw the market triple over the next decade, with a 20% rebound in just the first three weeks after the bottom.

• 9/11 Attacks (2001): The market dropped 11.6% in five days after reopening, but most losses were recovered within two weeks.

• COVID-19 Crash (2020): The S&P 500 fell 34% in just 33 days, the fastest crash in history. Remarkably, it fully recovered within five months, reaching new all-time highs.

• Black Monday (1987): The market crashed 22% in a single day, yet within two years, it had doubled.

These events underscore a critical lesson: markets recover, often faster than expected, rewarding those who remain invested.

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The Power of Staying Invested: A Case Study

Consider three hypothetical investors—Britney, Tiffany, and Sarah—who each invested $500 monthly in an S&P 500 index fund from 1985 to 2024, navigating every major crash and bubble:

• Britney, the “genius” investor, perfectly timed the market, investing only at the bottom of every major crash. Her portfolio grew to $3.3 million.

• Tiffany, with the worst timing, invested all her savings just before the six biggest crashes (e.g., the dot-com bubble, the 2008 crisis, and the COVID crash). Despite her poor timing, she still amassed $2.1 million.

• Sarah, the consistent investor, didn’t try to time the market. She automatically invested $500 every month, regardless of market conditions. Her portfolio? A remarkable $3.5 million.

Surprisingly, Sarah, who ignored market timing, outperformed Britney, the “perfect” investor. Why? Because Sarah’s money was always working, benefiting from compound interest over time. Even Tiffany, with the worst timing, turned $240,000 into over $2 million by staying invested. The lesson is clear: time in the market beats timing the market.

The Cost of Sitting Out

The biggest mistake isn’t poor timing—it’s staying out of the market entirely. A JP Morgan study illustrates this starkly: $10,000 invested in the S&P 500 from 2003 to 2022 grew to $64,844 if left untouched. However, missing just the 10 best days in that period slashed returns to $29,078—less than half. Missing the 20 best days left only $18,000, barely above the initial investment. Notably, the best days often follow the worst, meaning panic-selling during a crash risks missing the rebound.

What Not to Do During a Crisis

When fear grips the markets, the temptation to “sell everything” or “wait for things to get better” is strong. However, trying to time the market around a crisis rarely works. Historical data shows that

• Selling during a crash often locks in losses and misses the recovery, which can happen quickly.

• Waiting on the sidelines risks missing the market’s best days, drastically reducing long-term returns.

• Attempting to time the market requires being right twice—selling at the top and buying at the bottom—a feat even professionals rarely achieve.

Instead, the most successful strategy is often the simplest: dollar-cost averaging, or consistently investing a fixed amount over time, regardless of market conditions.

A Personal Approach to Investing in Turbulent Times

While no one can predict the market’s daily movements, a disciplined approach can weather the storm. Personally, I continue dollar-cost averaging into the broader U.S. stock market, holding real estate, maintaining cash reserves, and opportunistically buying assets like Bitcoin during dips. This strategy prioritizes consistency over speculation, aligning with the historical evidence that staying invested yields better results than reacting to fear.

A Note on Geopolitical Fears

Current conflicts may evoke fears of a larger global escalation, but history suggests restraint is warranted. Nations like Iran, China, and Russia face their own challenges—economic, political, or military—that may limit their ability to escalate conflicts significantly. While optimism isn’t a guarantee, it’s a reminder to focus on what you can control: your investment strategy.

Conclusion: Stay Calm, Stay Invested, Stay Smart

Global conflicts and market volatility can be overwhelming, but history teaches us that panic is the enemy of wealth-building. By staying invested, avoiding knee-jerk reactions, and focusing on the long term, you position yourself to benefit from the market’s resilience. As the saying goes, “Time in the market beats timing the market.” Stay calm, keep investing, and let time work its magic.

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