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Analyzing October’s Bumpy Market History and Other Listener Questions Thumbnail

Analyzing October’s Bumpy Market History and Other Listener Questions

Pop quiz: What do Black Tuesday 1929 and Black Monday 1987 have in common?

They both happened in October.

That's probably a big reason why October has a reputation for being the worst month for investing. But as we discuss on today's show, digging into the numbers and taking in the broader historical perspective reveals some more important lessons for investors who get spooked by volatility. We also bring that same long-term perspective to a couple questions our Keen Wealth clients have been asking recently.

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1. What's the worst month for the markets?

OK, you probably guessed that October isn't the answer.

In fact, September has, historically, been the worst month for investing. The so-called "September Effect" is often attributed to folks wrapping up vacation season and selling some assets to lock in gains for the year, or to offset the fall costs of schooling and holiday shopping.

As for those infamous October dates, as painful as they were, let's put the numbers in perspective.

If you told someone during the Great Depression that the Dow would be over 1,700 in less than 50 years, they probably would have thought you were crazy. Same if you'd told someone on Black Monday that, in about 20 years, dropping below 10,000 would be considered a catastrophe.

As we record today's episode, the Dow sits above 35,000 -- and, as you may remember, my co-host, Matt Wilson, has the hat to prove it!

The lesson that we try to share with is that weathering market pullbacks, however big or small, is a sort of "tax" that investors pay on the long-term wealth-building that the markets provide. When you're working with an advisor and following a financial plan, you have tools at your disposal during downturns to look for opportunities and course-correct when necessary.

2. What investments can help me catch up on savings?

We hear this question quite a bit from folks who feel like they're behind their retirement goals. In some cases, it could be a person who's genuinely worried about securing their retirement. In others, it might be someone who has a number in their head that they feel like they need to hit before they can retire.

In either case, the answer is the same: despite what you might read on social media or see advertised on TV, there are no products that can transform your financial picture overnight. It's a very slippery slope from asking these kinds of questions to chasing after some very unreliable investment strategies, such as meme stocks or market timing.

At any stage of your financial journey, growing your savings and building wealth requires working hard, controlling your spending, and sticking to your saving and investment strategy, regardless of what's happening in the wider world or the markets. The earlier you commit to that program, the less worried you're going to be about catching up as you near retirement.

3. Can I still do a "back door" Roth IRA conversion?

For the moment, yes. But closing the loophole that allows folks to deposit after-tax money into a traditional IRA and then immediately roll that money into a Roth IRA is a hot topic in the negotiations over President Biden's Build Back Better Plan.

If Congress does do away with back door Roth IRA conversions, some investors, depending on their income, might benefit from investing in a Roth 401(k) if offered by their employer. Also, whether Roth or Traditional, always make sure to top off allowable annual 401(k) contributions, if possible.

Again, making these decisions comes back to viewing your personal financial goals with a long-term perspective and tailoring a financial plan to meet those needs. Call up my team at Keen Wealth and let's work together on a plan that will inspire confidence today and in your future.

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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