Owning stocks in a bear market is never an enjoyable experience. Buying them then, is even harder. But historically, it has been the smart thing to do during every bear market in your lifetime.
A diversified portfolio of stocks has always delivered high long-term returns. No other asset class (like bonds, bills, real estate or precious metals) generated returns that are even close. However, this is already common knowledge and nothing new. Bit what many investors do not know is the fact that although stocks are riskier in the short term, over the long run the returns on stocks are so stable that stocks are actually safer than either government bonds or Treasury bills.
So, how can stocks be safer than bonds or even T-bills? This does not sound right. But when you own a share of stock, you own a fractional interest in a business and when you own a portfolio of stocks you own a broad selection of businesses in different industries. As the net income of those businesses grows over time, so does the value of your portfolio. There will be bad and good times along the way. But history clearly demonstrates that corrections or even bear markets are definitely buying opportunities. Every single time! You just need to be patient and have time on your side.
The reason why investors are reluctant to get in when prices are on sale is fear. That’s only natural, of course, when your hard-earned savings are at stake. But history shows that so far, every bear market was an opportunity to buy high-quality assets while they are inexpensive. Wise investors will use it and add quality to their well-diversified portfolio.
Sven Franssen