I know that this downturn is very disconcerting and probably has many of you worried. This is not the time to sell but the time to put more money in. There are rare times when the market gives you opportunities to put money in at a discount. Although short-term volatility swings can be difficult to stomach, it’s important for long-term investors to persevere. While it may be tempting to pull out of the stock market, you may miss out on a potential market rebound and opportunity for gains while you are on the sidelines. In the chart below, the purple bars represent the largest declines from a “peak” (high) to a “trough” (low) that occurred each year. Despite intra-year volatility, the S&P 500 Index had positive year-end total returns 25 out of the last 30 years. If you miss the immediate upturn, you miss most of the upturn of the next 4 or 5 years.
The chart below is compelling. It shows the results of missing very few days and the resultant returns. It makes the point that if you miss the upturn after this downturn, your average return for the next several years will be far lower. It’s point, stay invested!
The chart below demonstrates the power of stocks over all other asset classes. So moving to bonds or real estate is not going to produce better returns.
The market has shown resilience. Every S&P 500 downturn of about 15% or more since the 1930s has been followed by a recovery.
Recoveries have been strong. Returns in the first year after the five biggest market declines since 1929 ranged from 36.16% to 137.60%, and averaged 70.95%. Over a longer term, the average value of an investment more than doubled over the five years after each market low.
Don’t miss out on potential market rebounds. Although recoveries aren’t guaranteed, taking your money out of the market during declines means that if you don’t get back in at the right time, you’ll miss the full benefit of market recoveries.
Stay invested…you will be rewarded if you do.