That’s not to say that investors who stuck with stocks didn’t endure a bumpy ride. After that initial hiccup, the market slipped by 4% or more four more times en route to its near 14% 2014 gain.
The point is that trying to outguess the market is futile. Clearly, there are going to be serious setbacks in stock prices. Since World War II, we’ve had eight major downturns averaging nearly 39% and lasting an average of 19 months.
But predicting whether a dip in prices like we saw last week is the prelude to a meltdown or a false alarm from which the market will recover and march to new gains is virtually impossible.
So rather than guessing whether to stay or bolt, you’re better off developing an actual investing strategy — namely, building a diversified portfolio of stocks and bonds you can live with through all sorts of market and economic conditions.
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Morningstar: © 2015 Morningstar, Inc. All Rights Reserved.
Factset: FactSet Research Systems Inc. 2015. All rights reserved.
Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.
