It was a rough fourth quarter in 2018 for the markets. These days, just about every news organization you can find is packed with headlines about market volatility and editorials about a possible bear market in 2019. Frankly, it's true. One major index has brushed up against a bear market already, and its possible volatility will continue for the foreseeable future. But does this mean we should panic? NO.
Let's break this down objectively by discussing a few items:
Definitions of a market correction and a bear market.
A market correction is a 10%-20% decline from a recent peak.
A bear market is defined as a 20% or greater decline from a recent peak.
Corrections - and even bear markets - are a normal part of investing.
On average, a market correction occurs about every 1-2 years.
Bear markets are less common, but are far from rare. Between 1900 and 2015, the markets encountered 32 bear markets - roughly one every 3.5 years. ("Bear Markets", Investopedia)
Panic only makes things worse.
Unfortunately, investors aren't always rational. The fact is many investors do panic during corrections and bear markets, especially if they last for a long time. Remember, panic has destroyed more wealth than any bear market.
The final thing that you should know about bear markets is also the most important.
Accepting market volatility as normal doesn't mean we don't have a plan for dealing with it.
Let's assume, for the sake of this discussion, that the current volatility will continue and even worsen. Here at Financial Strategies Group, we accept that it's normal and learn as much as we can about it. But we also have a strategy for dealing with it.
We look at your long-term goals, research which investments will do well over the long-term so you can reach those goals, and then adjust your portfolio from time to time so you can stay on track over the long-term.
Notice that I used "long-term" three times in the same sentence. That's because it's so important. Just as one can get sick and still be a healthy person in the long-term, so too can the markets. That's why you should focus on living and let us do the worrying. We'll continue to monitor the markets and the economy. We'll continue researching your investments to make sure they continue to make long-term sense for your goals.
As always, contact me if you have any questions or concerns. In the meantime, have a wonderful and happy New Year!