Stocks Go Down All The Time

Hi friends, the market goes down all the time, but it never stays there. Over the last 25 years, the market has had an average temporary decline of 14.9% per year, and during that same 25-year period the S&P 500 had an average return of positive 9.4% per year. But to achieve that excellent return, the price that you had to pay was to maintain your investment strategy through that average decline of almost 15% during each of those years. I am sure there was a compelling reason to sell that you had to tune out. We don't have to like it, but what is critical to understand is that on average the market will be down significantly during the year at some point.

These are the essential moments where we must stick with our long-term strategy in order to reach our goals. Furthermore, despite a temporary decline every single year, the market still finished positive in 19 of the past 25 years. In fact, the market was up more than 20% in eight of those 25 years. This also includes 2009 and 2020, where the market finished up 26% and 18% respectively, after declines of more than 25% during those years.

This data shows that as long as you are properly diversified, you should hold your investments during market declines, or even better, be prepared ahead of time to rebalance and take advantage of these declines by shifting additional funds to stock while they are temporarily discounted. Thank you, and I look forward to talking with you next Friday.