Mind Games: Market Corrections
Market corrections can cause great angst, uncertainty, and fear. During these times, maintaining proper perspective is essential to maintaining long-term investment decisions. Living through increased uncertainty and declining markets can be difficult. Consider these three perspectives:
- Be prepared for negative news. There have already been headlines promoting the “worst ever start” to a year. These kinds of superlative headlines occur even in years when we have strong market performance. They are not predictive of future market performance.
- Corrections are normal market events. Market drawdowns of more than 10% occur frequently. Even bear markets (where the market is down 20%) occur routinely. Since 1990, we have experienced seven bear markets – two of which cut the market in half. Despite these painful, temporary losses, the S&P 500 was up 13x over that period.
- Time IN the market, not timing the market. We know selloffs will happen, which is why we believe time in the market is more important than timing of the market. Patient and disciplined investors stay the course of their convictions.
These perspectives may help you through the situation to remain true to your investment plan. We believe the best course of action for investors is to focus on the long-term view, maintaining diversified portfolios of investments that anticipate a broad range of outcomes.
By Marcus E. Ortega, ChFC, RFC | Investment Advisor Representative | CEO of Mosaic Financial Associates & Orthopaedist Advisory Group | Securities and advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor. Cetera is under separate ownership from any other named entity.
©The Behavioral Finance Network. Used with permission.