Shepherd Wealth & Retirement - March 2018



The stock market is one of the most dynamic forces of wealth- building out there. As markets soar, so do opportunities. But perhaps where we learn the most is not in the market's rise, but rather in its fall. That’s why we’ve decided to cover the three biggest crashes of recent history. Black Monday August of 1987 was one of the most exciting times in the history of the stock market. The Dow Jones industrial average was peaking at over 44 percent from the previous year. Markets around the world were on a path of ascension, and Wall Street was right there in the passenger seat. That is, until Black Monday. In October of 1987, the Dow dropped 22.61 percent — the single largest one- day percentage decline in the index ever. To put this in perspective, that’s nearly 10 percent higher than the crash that started the Great Depression in 1929. Worldwide markets were affected, but the U.S. market would bounce back and regain its pre-crash value by 1989. Dot-com Bubble The time between 1997 and 2000 characterized one of the most aggressive growth periods in the stock market. The internet was driving unprecedented growth in the Nasdaq, the technology- based index. But the rush of people getting into the market began to present a very real problem. The influx of new investors, combined with seasoned investors leaving traditional funds for these opportunities, led to a massive overvaluation in stock price and created a bubble. In 2000, the bubble didn’t just burst — it exploded. Companies in this market had been operating at a loss in an effort to gain market share, and they focused on growth over profits. When the bubble burst, most of these companies were left with no tangible assets to back up their existence. By 2002, the Nasdaq had dropped 78 percent in just 30 months. The Great Recession The dot-com bubble may have actually contributed to the Great Recession that began in 2008. In order to ease the effects of the tech collapse, the government instituted lower housing interest rates. This created more mortgage opportunities and eventually led to aggressive, predatory lending. The market grew, but a massive amount of these loans were given to borrowers who couldn’t actually afford to repay them, thus creating “subprime mortgages.” When the bubble burst, the market was hit hard. The Dow fell 50 percent over a period of 17 months, painting a picture very similar to what happened in the Great Depression. WILL HISTORY REPEAT ITSELF?

Everyone faces the prospect of growing older. When it comes to aging, people’s primary concerns include aches, pains, and changes to their physical appearance. But perhaps even more important is mental health. Fortunately, there are ways to keep your mind sharp as you age so you can enjoy your retirement. EXERCISE Working out is inextricably tied to wellness in all its forms. A simple, light workout now and then not only maintains physical health, but it also boosts your mental well-being. A 5-mile walk once per week can increase brain volume and prevent mental diseases, including Alzheimer’s. It’s no wonder exercise is the go-to solution for maintaining wellness. LEARN NEW HOBBIES Do you want to reduce memory loss by 40–50 percent? Dan Buettner, a researcher and best-selling author on studies about happiness and longevity, suggests learning a new hobby. Whether you learn to knit, paint, or discover a new board game, you’ll enjoy improved mental health. Get your hands moving, and your mind will surely follow. (Note: Watching TV as a hobby doesn’t count! People who regularly watch TV may suffer up to 50 percent more memory loss.) SOCIALIZE If you want to maintain mental health, make socializing a priority. Having an active social life increases your resistance to mental diseases and improves your mood. Furthermore, a healthy social network of friends and family (and we’re not talking Facebook here) helps give you a support system to fall back on when times get tough. TAKE A BREAK Take a step back from your everyday life and enjoy the small things. Set aside time to sit down with a good book or another activity you enjoy. While on that 5-mile walk, why not take a few moments to slow down your pace and look at the world around you? As the famous saying goes, “Stop and smell the roses.”


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