The often unspoken worry of many investors is what to do if a market correction is coming. Well, indeed there will be a market correction in the future, and another one after that. In fact, on average, the yearly declines of the S&P 500 exceed 14%! Since a stock market correction officially takes only a 10% drop, we can essentially expect a correction every year.
Should you worry about the coming correction? No, not if you are a rational investor. Despite average declines of more than 14% per year in the S&P 500, more than 75% of the calendar year returns were positive since 1980, (28 of 37 years to be exact).
A large part of our value comes from providing clients “permission” to stop worrying about all the things the media wants you to worry about. Market corrections are like what traffic engineers call “traffic calming” designs. These physical design measures are helpful in the long run but sometimes cause a slowdown or congestion in the short term. We may not particularly like these “traffic calming” measures, but they ultimately help us safely reach our destination.
Remember, you shouldn’t worry because corrections are expected and because your plan requires the long term returns from the stock market to succeed. Don’t allow the advertising peddlers, (the media), to cause you unnecessary angst. Ready for a real conversation?