Companies Are Rational, The "Stock Market" Isn't
Companies and what's referred to as the "stock market" are two different things. Companies are rational. The "stock market" is irrational. When you begin to realize that we are long-term goal-focused investors and we are owners of successful companies rather than just investors in the "stock market" you can change how you perceive the panic that the financial "news" media assaults us with on a 24/7 basis.
The difference
The best companies in America and the world are rational. They pursue long-term sales strategies, they innovate constantly, they run their businesses to increase their revenue over time regardless of whatever temporary crisis the 24/7 financial "news" media is pushing that day.
The "stock market" is irrational and focuses minute by minute on the immediate earnings of those companies that could be affected by interest rates, commodity prices, currency values, quarterly GDP, unemployment, politics, geopolitics, etc, etc...
The "stock market" literally responds immediately to investor mood and behavior which also can change minute to minute. In other words, the "stock market" has a mob mentality. The best companies in American and the world do not share that mentality.
Recently...
It may seem like awhile ago but in February of this year, 2025, the "stock market" as represented by the S&P 500 (the largest 500 companies in America) was selling at some of the highest prices ever recorded and in a matter of 50 days that same "stock market" was down 22%. Did those companies earnings fall by 22% over that time? The answer is no. The mob decided that tariffs were going to hurt those companies and mob mentality took over rational thinking.
It's important to realize that "stocks" and companies are two different things and frequently the price of a companies stock doesn't actually represent their actual value. The same thing happened during Covid when the "stock market" declined approximately 30% in 30 days.
Example:
Here are some example of companies that stocks frequently decline when the financial "news" media tell us to panic.
Apple- Nine out of ten people I know use an iPhone.
Alphabet (Google)- Ten out of ten people I know use Google.
Netflix-Ten out of ten people I know watch Netflix or something similar.
Verizon-All of us use of wireless carrier
Proctor & Gamble-All of use paper towels, shampoo, razor blades, etc...
Amazon- Everyone I know orders items on Amazon
My question to you is this: Would you suddenly stop using these products and services if the "stock market" suddenly went down 30-50%?
The answer is no, of course you wouldn't because you like and need those services. Stocks of those companies can decline at any minute, however, real people like you and I continue to buy their goods and services. That's why they stay in business. They don't stay in business because of their stock prices.
And if history is any guide, they will continue to profit because of us and their long-term value will continue to increase and that process has led to 10% annual returns for about 50 years or so.
Key takeaway
The short term prices of a stock rarely reflect the companies actual value. The long-term prices of a stock ALWAYS reflects a companies value.
Companies are rational. Stocks are not.
Remind yourself daily that you own companies and not just stocks.
You need a plan
Retiring - without a plan - is simply a plan to run out of money. Your NRECA R&S Pension is not a plan. Your NRECA 401k is not a plan. Your Social Security is not a plan. Those are only pieces in the retirement planning puzzle.
At 80/20 Financial Services we specialize in helping cooperative employees plan their retirement. We can show you how to turn your 401k and your R&S lump sum into a stream of income just like when you were working while also helping you achieve your desired financial outcomes in retirement. We help you retire with a plan, not just a portfolio.
A retirement planning consultation is free and without obligation. Contact us to set up a consultation.
For more articles about retirement planning and investing click here.
Brian Coleman/Electric Cooperative Retirement Specialist
80/20 Financial Services is an Independent Registered Investment Advisory Firm. We help Electric Cooperative Employees create their retirement income and investment plans. We turn your NRECA 401k and R&S Pension into a plan that will provide you lifetime income and can change your family's legacy.
Photo by Jon Tyson on Unsplash
