Surviving Difficult Market Conditions

Surviving Difficult Market Conditions

During periods of volatility in the stock market, you may have doubts about your long-term investment strategy. Here are five tips to help you avoid common pitfalls and stay on track toward achieving your financial goals.

1. Declines have been common and temporary occurrences.

Problem: Declines can cause imprudent behavior by filling investors with dread and panic.

Solution: Realize that declines are inevitable and have not lasted forever. History has shown that stock market declines are a natural part of investing. While declines have varied in intensity and frequency, they have been somewhat regular events. It may also reassure you to know that the market has always recovered from declines. Although past results don’t guarantee future results, remembering that downturns have been temporary may help assuage your fears. Accept declines as a normal part of the investment cycle.

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2. Proper perspective can help you remain calm.

Problem: Studies show that people place too much emphasis on recent events and disregard long-term realities.

Solution: Even during a market downturn, remember that stocks have rewarded investors over time.
The stock market has a reassuring history of recoveries. After hitting lows in August 1939 and September 1974, the Standard & Poor’s 500 Composite Index* bounced back strong, averaging annual total returns of more than 15% over the next 10 rolling 10-year periods in both cases. Long-term investors have been rewarded. Even including downturns, the S&P 500’s average return over all rolling 10-year periods from 1937 to 2019 was 10.47%.

*Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.

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