When the market takes a big tumble right at the time the money is invested, then do not worry. It is simply bad luck. When this money is invested for at least the next 10 years or longer, there is the chance of close to 100% that you end of with substantially more than you originally invested. Because stock markets go up over the long term.
It is certainly frustrating to be down more than 10-20% in the short term, sometimes even worrisome because we talk about real money and your savings. But here is the good news:
– Since 1929, stocks have risen roughly 78% of the time. This means nearly 4 out of every 5 days! Of course, in a bear market, it can be different, with more bad days and often in a row. But if you are invested for the long term, the odds are you are going to make money.
– Since 1945, on average a bear market appears roughly once every 5 1/2 years. So, bear markets happen, are not exceptional and arrive on a regular basis. So, if you invest in the long term, you will experience multiple bear markets. It is unavoidable.
– Bear markets last an average of 9 1/2 months and drop an average of 36%. This is a huge decline in a very short period of time. It is frustrating and scary. But they don’t last forever and recover fairly quickly.
– Instead, the average bull market lasts for nearly 3 years and rises 102%.
With other words, if you invested your money in stocks and immediately went into an average bear market, followed by an average bull market, you’d be up a little more than 29% in just over 3 1/2 years and results in an average return of 8% per year, which is not bad at all.
But please have on mind, a bear market can be worse than average and last longer. Additionally, a bull market could be less than average and last shorter. But studies of over 100 years of stock market activity proves that you should be invested in the market all the time, regardless of the short term down swings. You chance of missing out the good times is higher than timing the market right. Rather add to your existing portfolio when the market is on sale. It won’t stay down forever. It will reverse inevitably and move higher like it always has.
No one wants to lose money. But if you ignore the short-term volatility and stay in the market, history proves that you will finally make money. Always!
Sven Franssen