“Long-term investment success depends almost entirely on how one handles stock market declines emotionally, as opposed to how one’s portfolio handles them.”
One of my favorite financial authors, Nick Murray, coined this phrase a long time ago. Go back and read it again. It’s a succinct and meaningful quote that investors should stick to their monitors as a reminder when they view their account statements.
Investors should focus on the things they can control, namely their own actions, during times of stock market volatility.
A version of this article is being written in one form or another all over the country and the world. With the third quarter over and investors beginning to receive statements pointing to continued declines, many will be faced with the choices outlined above.
Unfortunately, too many people will let their emotions run wild and forget that it is more often our own actions in response to market declines that can potentially harm our long-term results. Investment portfolios, especially those that are well diversified, are designed to be more resilient.
We’ve seen tough market environments before and we’ll likely see them again when this current period is behind us.
This can come across as yet another “do nothing” or “stay on track” message. In some ways it is. We often believe that choosing not to do something is the wisest course of action.
I suggest looking at this time as an opportunity to act rationally rather than emotionally. Prudent investors will reassess their cost of living and spending choices when markets are affected.
Can you postpone or postpone the withdrawal of your investments for a certain period of time? Do you have the option to use cash from a bank account instead of portfolio assets? Should You Rethink Your Social Security or Retirement Strategy? Is Now a Good Time to Consider Roth IRA Conversion Options?
All of these questions focus on proactive steps you can take in challenging times. Note that none of the above items mentioned anything about panic selling stocks or bonds.
The biggest difference between people who get through these tough times and those who aren’t revolves around planning.
Those who have a plan or a trusted financial advisor they can consult can avoid a big mistake. It’s easy to get caught up in the whirlwind of the daily market swings we’ve been experiencing lately, but don’t lose sight of the bigger picture.
The economy may be off-putting for a while, but better times are coming. It is probably our own choices, even more than our portfolios, that can determine how we do until then.
This is for informational purposes only and should not be construed as personal investment advice. Consult your financial professional about your unique situation.
This is how college costs have changed since the 1960s
A Closer Look at the Rising Cost of College in the US
Earning a college degree has typically paved the way for a brighter economic future. Those with a bachelor’s degree typically earn 75% more in their lifetime than with a high school diploma alone.
The price of that college degree has become more daunting by the year. The average undergraduate tuition, fees, room and board for full-time students in the 2020-21 school year was $25,910.
While scholarships and grants offset the cost of college, many people fund their higher education through student loans, which has resulted in approximately 44 million Americans now paying off $1.7 trillion in student debt.
Sound Dollar examined data from the National Center for Education Statistics to see how tuition costs for private and public higher education institutions changed between the academic years 1963 and 2020. Tuition and costs were weighted by the number of full-time students, while cost and lodging are based on full-time students.
Room and board bills for student housing and meal plans. For public institutions, the in-district or in-state tuition was used. To account for inflation, amounts were calculated in today’s dollars using the consumer price index.
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The cost of the university since 1963
In the 1940s, 1950s, and 1960s, the federal government passed several laws that sent more money to states to fund higher education and kept college costs down. More people chose to go to university because it was cheaper.
Over the past 15 years, states have cut college funding, spending $6.6 billion less on higher education in 2018 than in 2008. Colleges have chosen to shift more of the cost onto students by raising tuition fees . Household income has not kept up with these increases, so students have mainly turned to student loans to fund their education.
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How do the costs of a four-year and a two-year university compare?
Four-year colleges typically cost more than two-year colleges because they tend to spend much more on infrastructure, administration, and student services than two-year colleges. In general, four-year colleges are designed for students who leave their families to go to school, so there are more dormitories, student health services, sorority clubs, and programs — and the occasional lazy river.
Two-year colleges usually target commuter students who live at home, and they may also offer more skill-based or technical programs, both of which help keep the school’s overall operating budget lower. While tuition and fees are much cheaper in two-year schools, they only get 25% of their income from tuition. Cuts in state funding over the past 15 years have pushed tuition fees at these institutions up.
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Increases in private schools surpassed public schools
The sticker price of tuition in private schools has been much higher than that of public schools over the past 30 years. Private schools receive no government funding, so they depend on their endowment, tuition, and donations to cover their costs. They are also usually smaller than government-funded schools, so they often charge more tuition and fees because there are fewer students.
That said, private schools often offer tuition discounts to make costs more bearable. These discounts can include merit-based awards, grants, grants, and other funds that reduce full tuition. In 2021-2022, private college freshmen received an estimated 54.5% discount on average, which is a record according to the National Association of College and University Business Officers. Of all students, private universities offered an average tuition discount of 49%. Between 2020 and 2022, many schools offered discounts for the academic year due to the coronavirus pandemic, although many did not extend them as students returned to face-to-face classes.
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Housing has remained a fixed part of the cost, while food has declined
Colleges use on-campus room and board as another source of income. In the early 2000s, many colleges added more amenities, technology, and specialty dining options to make them more appealing to prospective students who wanted all the comforts of home. This naturally contributed to higher maintenance costs.
While the cost of food has fallen over time, that may be a result of the way meal metrics are defined. For the 1986-1987 academic year, plate food was defined as meals seven days a week, without any insight into how many meals were actually served. Now it is defined as 20 meals a week.
This story originally appeared on Sound Dollar and was produced and distributed in association with Stacker Studio.
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Chris Ruedi is a financial advisor at Savant Wealth Management, Bloomington.
