Editors Note: This article was originally published in the Aug. 16, 2023 issue of the Chronicle Progress. Some information may be outdated.
Logically, we know the markets go up and down.
That's easy to remember in times of growth, but it's much harder when market volatility arrives, and we feel compelled to take action based on emotions, not logic.
The decade-long bull market of the 2010s eased the pain many investors felt from the 2008-09 financial crisis. Reality came crashing back in early 2020 as COVID-19 spread globally, and markets plummeted in response. The downturn left investors searching for reassurance and fortunately, that reassurance is easy to find. A glance at the history of the U.S. stock market provides us with three reminders about the true nature of volatility.
- VOLATILITY IS NOT NEW.
Between 1950 and 2020, we’ve experienced 36 market corrections (a market pullback of 10% to 20%).1 But here's the good news: three-quarters of market corrections from the last 50 years never turned into a serious bear market. Most were short-lived, lasting three months or less.2 History shows us that it's taken an average of four months to recover from prior corrections.3
2. TIMING THE MARKET DOES NOT WORK. TIME IN THE MARKET DOES.
It's nearly impossible to know when investments are at their highest or lowest. You might be able to achieve it once, but the odds of replicating such success are incredibly slim. Instead, the more prudent approach is to put time to work for you. Investors who try to avoid volatility by timing the market may miss out on the worst days, but they may also miss out on the best ones. Check out this illustration, showing what happens when an investor misses the market's best days:
So, what can you do when you're concerned about the markets? We recommend:
REBALANCE. Check to make sure your portfolio is diversified and balanced to fit your goals and risk tolerance.
REFOCUS. It's easy to get distracted from long-term goals when the short-term news is frightening. Reach out to us, and we can help to determine planning opportunities that may be available and beneficial for your future.
REAFFIRM. Does your financial plan still match and move you toward your retirement goals? We're happy to help you review and adapt your financial plan to make sure it still works for your life.
If you're concerned about market volatility and how it's affected your retirement plan, call us today at 801-465-6990. We can help you create a strategy to navigate market uncertainty and ensure you're still on track to realize your retirement goals.
Scott Wharton
Retirement Solutions
For informational purposes only. Investment advisory services through Retirement Solutions Investments, Inc. Insurance through Retirement Solutions, Inc. Additional information at www.rsutah.com.
1 Ben Carlson. A Wealth of Common Sense. Feb. 14, 2021. "A Short History of U.S. Stock Market Corrections & Bear Markets." https://awealthofcommonsense.com/2021/02/ a-short-history-of-u-s-stock-market-corrections-bearmarkets/. Accessed Oct. 29, 2021. 2 John Bromels. The Motley Fool. Oct. 4, 2021. "What Are Stock Market Corrections?" https://www.fool. com/investing/how-to-invest/stocks/stock-marketcorrections/. Accessed Oct. 29, 2021. 3 Thomas Franck. CNBC. Feb. 27, 2020. “Here’s how long stock market corrections last and how bad they can get.” https://www.cnbc.com/2020/02/27/hereshow-long-stock-market-corrections-last-and-how-badthey-can-get.html. Accessed Oct. 29, 2021.
