Markets go up over time, but it’s rarely an easy journey. Inevitably, they decline. 

Of course no one gets anxious or complains about the good times. 

When you invest in the stock market, you need to get comfortable with the idea that stock prices will decline – and your account value will go down at times. It’s happened before, and it will happen again. 

Emotions come naturally with the ups and downs of the market – 

As the market goes up, you experience excitement, thrill, even euphoria. 

Then the market drops, as it always does at some point. You feel anxiety, fear, PANIC. 

Investors often want to sell when the market is down, but that’s not a wise move. Part of the emotional cycle is thinking you can avoid the losses and then reinvest later when the outlook is better and still participate in the gains. Unfortunately, most often, it doesn’t work that way.

When the market starts to rise – again, as it always does at some point – you start to feel hope, relief and optimism.

Sound familiar? That’s why the most important skill of any successful investor is PATIENCE.

How often do you think these drops and recoveries happen?

A routine drop of 5% happens about  3x a year

What about a 10% drop? About 1x a year

20% decline…a bear market? 1x every 3 years

While it may feel like the sky is falling, even bear markets are to be expected. In each of these cases, the market has historically recovered and gone on to reach new highs. Of course, past performance is no guarantee of future results.

20% decline…a bear market? 1x every 3 years

While it may feel like the sky is falling, even bear markets are to be expected. In each of these cases, the market has historically recovered and gone on to reach new highs. Of course, past performance is no guarantee of future results.

Sometimes recovery is quick – a few weeks or months is all it takes to reach a new high. At other times, it takes longer to recover. 

The worst bear market in recent memory is the Great Recession of 2008. The S&P 500 dropped nearly 50%. Despite this significant decline the market took about four years to recover. 

That’s why it’s called market volatility. It’s hard to predict what will happen, but that doesn’t mean you can’t prepare for it.

First off, don’t panic. You don’t need to make any rash decisions. Investors often make poor decisions when they let their emotions take over.

You’ve heard the investment advice: Buy low, sell high. Strong emotions during market swings can tempt you to do the opposite – buy high and sell low. You may think you should sell some investments to avoid further losses. You may feel that doing something – anything – during a downturn is better than doing nothing. 

It may seem counter intuitive, but patience is usually the best solution.

Our planning takes into account this volatility. I cannot stress enough the need to think long-term when you invest in the stock market. Successful investors develop the discipline and patience to live through market fluctuations.

Inevitably when the markets decline, there is no shortage of negative forecasts and predictions.

We’re your voice of reason, looking out for your best interests. Our objective and realistic outlooks have guided our clients for more than 25 years of market volatility.