Corrections are anxiety-provoking.
They make us wonder if we got it wrong. If we’re going to be ok.
If this time is “different.”
After all, the S&P 500 plunged “at unprecedented speed,” and this was the “worst point drop in history.”1
Should we give in and get out? Sit on the sidelines until it all blows over?
No.
Market corrections are completely, boringly normal.
Whether it’s an epidemic, geopolitical saber-rattling, natural disaster, or a financial event, corrections happen regularly. They’re a natural part of the market cycle.
Here’s the historical take: Markets experienced 26 corrections between 1946 and 2018. On average, markets declined 13.7% and took four months to recover.2
To a long-term investor, a correction is a speed bump.
We can’t predict how long or how deep this correction will be, but we’ve been here before.
And markets have recovered.
Corrections are not something to panic about. Even when panicky headlines are everywhere. The 24-hour media cycle is all about stoking fears to draw eyeballs and shares.
The biggest mistake a long-term investor can make right now is to give in to the fear and make a big change in response to the selloff.
Emotional reactions to markets — whether it’s euphoria during a rally or anxiety during a correction — are deadly to long-term success as an investor.
It’s easy to answer a risk tolerance questionnaire and commit to a strategy when the market’s up.
It’s much harder to stick to the strategy when your portfolio drops. When it’s gut check time.
But you can’t reap the rewards of long-term investing if you don’t take the bad days along with the good.
Your investment strategies need to withstand turbulent markets. To pursue your long-term goals in all market environments.
Right now, I’d like you to do 3 things:
- Take a deep breath.
- Trust the process. Remember the conversations you had about your goals and the reasons behind the choices you’ve made together.
- If you’re experiencing anxiety, turn off the news, stay off social media, and go do something fun.
If you need a pep talk or to discuss your investment strategy, please don’t hesitate to reach out.
