Feeling nervous when the markets decline is an understandable and highly studied emotional reaction. When market cycles lower, as they have lately, perspective can help you overcome that emotion.
It’s important to recognize that market declines are a part of investing, and they happen frequently, as illustrated in the graph below. While past market performance is not indicative of future market performance, the decline of markets’ past has not lasted forever. In fact, each historical downturn was followed by a recovery and, eventually, a new market high.
Source: Capital Group, RIMES, Standard & Poor’s. As of 12/31/21.
Some investors tend to pull out of the markets when they decline. No one has a crystal ball that tells them the bottom or top of a market cycle. One of the biggest problems (among many other problems) with trying to time the market is, “When do you get back in?”
The graph below illustrates the results of missing some of the best days in the market compared to staying invested from 2012 through the end of last year. No one knows when the best ten days will happen, yet sometimes the best days occur during the early stages of the recovery before the recovery is recognized.
Source: RIMES, Standard & Poor’s. As of 12/31/21. Values in USD.
Our team has managed several market cycles and we’ve seen many ups and downs. When we created your financial plan and constructed your portfolio, we looked at your unique goals, time horizon, and risk profile. While we recognize and understand you may be nervous given the recent market declines, it’s important to stick to this plan to meet your long-term goals.
Please reach out if the markets have you feeling uncertain. You don’t have to go it alone; we are here to help you keep things in perspective.
The Concord Advisory Team
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