The Cycle of Investing
The Cycle of Investing
Market downturns are a natural part of the investing cycle, yet they can often lead to uncertainty and doubt among investors. During periods of heightened volatility, taking a moment to revisit key terms that are commonly used to describe market conditions can provide clarity and help you make more informed investment decisions.
A “pullback” represents the mildest form of market decline and is characterized by a modest drop of 5-10% following a peak. More significant downturns between 10-20% are known as a “corrections.” Finally, a “bear market” signifies a substantial decrease of 20% or more from the previous high.
When prices trend lower, it can be easy to second-guess your decisions. However, over the years, I’ve learned that reacting emotionally to market fluctuations rarely helps.
As financial advisors, we craft portfolios with the understanding that markets will experience both highs and lows. Your investment strategy should be designed with your personal goals, time horizon, and risk tolerance in mind, providing the stability needed to stay on track through every stage of the market cycle.
If you ever find yourself thinking, “this time, it feels different,” please don’t hesitate to reach out. It’s important that you feel comfortable with your financial strategy, and I would be happy to serve as a sounding board or address any concerns you may have.
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