With apologies to George Harrison and the Beatles, we know the headlines are nowhere near gently anything. As you may know, the market has gone into correction territory – meaning a drop of more than 10% below the most recent peak. (For the Dow, this “recent peak” was near 37,000 back in early January.) Whenever this happens, the headlines can drive investors crazy!
Despite how those headlines sound, though, corrections are a normal part of market cycles. The average annual drawdown from a peak to a trough has for many decades been 14%.1 This current decline may reach that territory. It may not. It may end up being down more than that average. Or it may be less. Nevertheless, the market does this from time to time. Sometimes there aren’t scary headlines driving it. Sometimes the headlines are scarier than today’s.
We can’t know how deep the correction will be, how long it will last, or whether it will become a bear market. But are we embarrassed we don’t know? Or worried that we don’t? No! Because no one does. No matter how smart the commentator on television is…they don’t. Even if they scream that they knew last time. And for a plan-driven, long-term investor, it really does not matter. Long-term could be 40 days for you or 40 years. Plans are created for the rest of our lives and none of us knows our expiration date.
Declines are natural and normal. Straight lines are abnormal. Now, of course, if you have money sitting on the sidelines and you were waiting for a better time to invest, corrections could be those times. Or if you are soon-to-be-retired or retired, remember that we have money parked to be your income. Money we set aside every month, so we never ever worry about taking while the market is down. We’ve got that covered.
Remember: Your investments are the engine to your plan, which is the vehicle driving you to all the destinations we’ve planned for your long-term retirement. Goals – Plan – Portfolio. Those are the things that matter. Current events are just that, current events.
Know we are always here to help.
1 “What it takes to be an equity investor,” ColoradoBiz, March 13, 2020. https://www.cobizmag.com/what-it-takes-to-be-an-equity-investor/