No doubt recent market drops, including Monday’s fall, have investors on edge. It can be upsetting to hear the news about tumbling world stock markets, as well as seeing the resulting losses in our portfolios. However, we encourage you to stay positive and try not to let these recent results affect your long-term goals.
On average, the stock market has a correction (a drop of 10%+ from a recent high) every 18 months. However, we had not experienced a correction since October 2011. The market was overdue, so this correction is not entirely a surprise. In fact, on average we have a 20%+ drop every 3½ years.
Because we never know when a downturn will reverse, it’s important to take the long-term view for investing. As you can see from this exhibit, missing the best 10 trading days from 1988 to 2014 (27 years) cut an investor’s return in half!
Some of you have heard this before, but after we hit the Great Recession market low back in 2009, it took a mere 10 trading days for S&P 500 to advance 20%!
This next exhibit is a great visual for putting downturns (bear markets) into perspective relative to gains (bull markets). Historically, long-term gains outweigh shorter-term losses…even though short-term can be more than a year.
We all know past performance is no guarantee of future results, but putting recent market movements in historical perspective can help ease our minds at times like these, and we hope this post have eased yours.
Content Prepared by Juli Erhart-Graves CFP®, President of Worley Erhart-Graves Financial Advisors