Reasons to be cheerful

If you’ve accumulated any significant amount in your retirement savings, the worst thing you can do is think about how much fun you could have had with the money you’ve lost in the stock market recently.

For example, let’s say you had $50,000 in your 401(k). We’ll use as our example fund the Vanguard 500 Stock Index fund, which, as of Tuesday, had shed 9.54% since the Standard and Poor’s 500 stock index peaked on May 20, 2015. As of yesterday, $50,000 in that fund has become $45,230, a loss of $4,770.

laborThis is not an insignificant amount of money. You could put together a fun vacation for $4,770. You could have a huge Labor Day cookout and invite half the town. You could buy about a half-ton of fireworks and set them off. Heck, if your money is going to go up in smoke, you may as well get to watch it go up in smoke.

Which brings us to our first reason to be cheerful: You probably didn’t have all your money in the stock market. According to the Investment Company Institute, the funds’ trade group, investors have $16.3 trillion in mutual funds. Of that, $8.7 trillion, or 53%, is in stock funds of all sorts. Had you used the same formula as the average fund investor, you’d be down $2,538 rather than $4,770. You could still have fun with that amount of money — let’s say a big day at the Apple store — but not as much.

Both bonds and cash have made negligible gains. But teeny-tiny gains are always better than honking big losses.

Another reason to be cheerful: If you’re a reasonably sober investor, you probably didn’t have a big chunk of money riding on China A shares, or Brazilian stocks, or emerging markets debt funds, all of which have been clobbered during the recent downturn.

If you do the bulk of your investing in corporate 401(k) savings plans, you’re probably — probably — investing in relatively low-cost institutional funds. Costs always count against you, but they inflict particular pain in a downturn. If the S&P 500 is down 10% and you’re paying 1.25% for fund management, you’ve lost 11.25%. On a $50,000 stock portfolio, that’s $625 a year, which could buy you a movie ticket a week all year.

Finally, if you do have money in cash or bonds, you have some dry powder for when the market does indeed recover. Bear in mind that you’re probably not going to nail the exact bottom of the market, except by accident. If you buy before the correction is over, you’ll probably feel dumb for a few months. Don’t. If you’re a long-term investor, buying high-quality stocks when they’re down is another reason to be cheerful.

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