In this video, we debunk a common investing myth – believing that investing is a smooth ride up.
Over the past several years the U.S. stock market has had very strong performance. Since the bottoming of the S&P 500 on March 9th, 2009, the S&P 500 has gained 404% (total return) setting 202 record closing highs through July 13, 2018. With this sustained success and low volatility, investors have been conditioned to expect these smooth and steady returns going forward. People have almost become hypnotized. That’s the myth!
What you need to remember is that downturns are inevitable. The Tech Bubble of the 1990s, and the Great Recession from the 2000s remind us that, eventually, markets will fall. The S&P 500 since 1980 averages an intra-year drop of 13.8%.
What can you do to avoid falling into this trap?
The key is to make sure you’re prepared before a decline happens. The emotional toll of a big decline can be difficult to stomach because you might look at your account and see that it’s going down every week. But you must stay strong because that desire to pull out of the markets when we see massive market volatility can shatter your long-term financial goals.
A good first step is to create an investment plan that will guide your decisions. So instead of making impulsive changes to your portfolio during big market swings, you’re able to make more objective decisions that’ll keep you on track to reach your goals.
How can you reach your goals?
Active portfolio management enables you to make these types of investment moves. But before you act, a good first step is to create an investment plan that will guide your decisions.