When producers from the CBS evening news first called me, the Stock Market was tanking, the Dow Jones Industrial Average was down over 1100 points that day. By the end of the day, the stock market had rallied to a gain of almost 100 points: quite the turnaround and a great lesson in patience with stock market volatility. Watch the video of Financial Planner LA David Rae on the CBS evening news with Pat Harvey and Jeff Vaughn sharing sage financial wisdom about what to do when the stock market gets volatile.

By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™

CBS: WE KNOW WALL STREET DOES NOT LIKE UNCERTAINTY, AND THIS SITUATION WITH RUSSIA, UKRAINE, AND THE WEST IS VERY UNCERTAIN. DO YOU EXPECT MORE VOLATILITY WITH THE MARKETS?

Financial Planner LA:  You should never be surprised by stock market volatility. It is the price of admission for the wealth-building magic of compounding interest via stock market returns. You should expect to see at least one stock market correction each year, which means at least one drop of 10%. The markets have been surprisingly calm for most of the COVID pandemic, but there is a reason this placidity is coming to an end.

Everyone has the ability to build wealth and earn great returns in the stock markets, but not everyone has the stomach to stay calm when stock market volatility rears its ugly head. It is never fun to see the value of your investments drop, but if you have been investing for any amount of time, you likely never would have seen your account grow to its current levels by saving money in a bank account. To put this in perspective, today – a crazy and wild day in the stock market (1/24/2022)- you would have earned the equivalent of 30 years of interest-based on the current rates paid by many checking accounts (0.01%). 

CBS: DAVID, A LOT OF OUR VIEWERS HAVE RETIREMENT PLANS SUCH AS AN IRA, 401(k) or 403(b). WHAT IS YOUR ADVICE TO THEM TONIGHT?

Recently the IRS had some good news for retirement savers looking to maximize their contributions in 2022. Contribution limits for 401(k) plans have increased in 2022. For employees, the contribution limit for a 401(k) in 2022 is now $20,500, an increase of $1000. For the self-employed or small business owners, the max for 401(k) profit-sharing plan or Solo 401(k) is now $61,000. Plus, a potential $6500 catch-up contribution for those aged fifty or older.

Regardless of how much you are contributing now, look to increase your contributions in 2022. At the very least, make sure you are contributing enough to get the full employer match; it is like free money.

For business owners who are looking to save beyond the 401(k) limits, talk with your tax planner and fabulous financial planner about adding a Cash Balance Plan to your tax slaying arsenal. This could help you contribute hundreds of thousands of dollars more per year, pre-tax, to your retirement accounts.            

CBS: INFLATION IS ALSO A BIG CONCERN FOR MANY PEOPLE RIGHT NOW — ANYONE WHO’S BEEN TO A STORE RECENTLY, FILLED UP THEIR CAR OR MADE A BIG PURCHASE KNOWS PRICES ARE UP. IS THIS A TEMPORARY INCREASE, OR DO YOU SEE THIS AS A LONGER-TERM ISSUE?

Financial Planner LA: Supply and Demand are out of whack in many areas of the economy. As long as this is the case, inflation will be an issue. Investing in the stock market is the best hedge against inflation in the long run. Prioritize your spending to things that spark joy. Look to stock up when items you use regularly are on sale.

CBS: AND WHAT IS YOUR FINAL MESSAGE TO OUR VIEWERS? WHAT DO THEY NEED TO KNOW TONIGHT?

Stock Market volatility is normal; there is always something scary happening in the news. Set up automatic contributions to your investments each month, and you won’t have to worry about what the stock market does day to day, or in the case of a day like today, minute to minute. We are in the middle of a pandemic, and the stock market has been flying high since the initial sell-off in 2020.

When things get scary is when a great financial planner really shows their value and earns their keep. Let us stress the twists and turns of the stock market day today.

Projections for the Stock Market in 2022 are strong, and this dip makes the upside potential even great for investors. Remember, stocks are the best place to build wealth over the long term.

Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.- Ben Graham

DAVID RAE, CFP®, AIF® is a Los Angeles Financial advisor and retirement expert with DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine, Forbes.com, Huffington Post as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook, or via his website www.davidraefp.com

Fiduciary Financial Advice Does it Really Matter? + Video