This Is Not The Time To Panic

Almost the worst January in history! The streets are red, and everything looks like doom and gloom. Your account is off its highs, and nearly every day you log in to see what stock and ETF prices are doing, it only gets worse. The Federal Reserve is telling us they will raise interest rates all while inflation is higher than they expected it to be. It's hard to see what will stop the pain anytime soon, despite the occasional rally, green day.

However, this is not the time to panic.

Unless you started investing in the summer of 2020, you have seen this before. And unless you plan to stop investing, you will see this again in the future once this round of pain subsides.

First though, let me remind you where we came from and why in reality, this is not nearly as bad as it feels today. On February 10th, 2020, the S&P 500 was at 3,380; This was the top of the market before the Covid-19 pandemic started being felt by market participants. The bottom came about a month later, on March 16th, 2020, at 2,304. That is a 31% drop.

However, on January 23rd, 2017, the S&P 500 was trading at 2,298 (this is 5 years ago). Even after a 31% drop caused by the start of a global pandemic, the S&P 500 was still trading a few points higher than it was just 3 years prior.

The great depression, the financial crisis, black Friday, black Monday, the flash crash, etc. There are countless times that the markets have been crushed. There are countless times that the fear of losing money has taken hold on Wall Street, and stocks get brought down hard.

But remember all those terrible days and remember that on December 27th, 2021, the S&P 500 has hit its most recent all-time high at 4,808.

I don't know where we go next, whether it's a few days or weeks or even months of the markets falling lower and then bouncing a little higher, or if in a week from now we fly past Decembers all-time high.

The point of all of this is that even though countless times in the past 150 years or 5 years, the markets have seen big pullbacks, it always comes back, and it always sets new all-time highs. Often much faster than you would expect it to.

Investors who started just in the past 2 years have never been through this, but those of you who have been in this game for decades understand that now is not the time to panic; now is the time to buy! Well, or sit on your good investments and be calm.

But if you want to buy, like me, let's take a look at my three favorite buy-and-hold ETFs you can own today; a little cheaper than you could yesterday.

First, we have the Vanguard S&P 500 ETF (VOO). You literally can't go wrong with this one. This is the most basic, cheapest S&P 500 index ETF you can find. You buy this, you are buying the S&P 500, plain and simple, and it's only going to cost you 0.03% per year. Buy this, buy it every month, and forget that you own it or that you are buying it. Years from now, when you go to retire, it will (based on past returns) be higher than when you bought it, plain and simple.

Next, we have the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). This ETF tracks an equal-weighted index of the S&P 500 stocks that's has increased its dividend payment annually for at least the past 25 years. So, essentially the ETF only owns companies that pay a dividend and have been raising their dividend. This makes the ETF very stable and a nice income producer, currently paying 1.99%. Yes, I get that dividend stocks fall when interest rates rise. However, my argument is the same as with VOO. If you buy this ETF and plan to own it for decades, not months or years, it will be worth a lot more in the future than it is today, especially if your dividend reinvests with this fund.

Finally, I have the Invesco QQQ Trust (QQQ) or something a little broader like the iShares Global Tech ETF (IXN). Basically, you want to look for something that is investing in technology companies; whether that is just here in the US or globally, that is up to you. The QQQ is also just the top 100 tech companies in the US, while the IXN is 1,200 global companies, which honestly may be too broad, but you get the idea. The future of the world, the next five, ten, twenty years, is clearly technology. So, investing in a small US only 100 stocks subset or globally with over a thousand stocks, at the end of the day, you will likely come out about the same, ahead of where you are today. This, though, is a little riskier than the VOO or the dividend play, but it also has a lot more upside than the other two more conservative routes.

Realistically, it doesn't matter a whole lot where you put your money in the stock market; with time and the ability to not panic, the market will reward you with more money than what you started with. Find quality investments and then go worry about something else.

Matt Thalman Contributor - ETFs
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.