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Surviving Market Volatility


What should investors do when markets get bumpy?

When markets are volatile, it's tempting to change something in your investment plan simply because other investors seem to be fleeing for the exits. But keeping a cool head, especially when others are fearful, is one of the best strategies for managing through periods of uncertainty.

Since 1926, US stocks have been positive about 73% of the time. So, even though stocks did move lower in 27% of calendar years, historically, there have been far more good years than bad.

As human beings, we are all subject to our emotions. Every successful investor feels the urge to take some action in their portfolios when the headline news seems dire and daily account values fluctuate. Being a successful investor doesn't mean being immune to fear. It does require, however, that you not be governed by it.

Consider that since 1993, US large stocks have experienced an annualized return of 9.2%, essentially doubling each dollar invested every 8 years. $10,000 invested in 1993 would have have been worth over $58,000 in 2013. But if an investor had missed just 10 of the best days during that same period, they reduced their return by almost 50%.

Being a successful investor, doesn't require having a crystal ball or being able to predict short-term market moves. Successful Investing requires discipline and patience. Being willing to stay invested, in both good times and bad, and periodically rebalancing your portfolio to the advantage of short-term market moves, are the most reliable ways to profit long term.


Source: S&P 500 index.

See Disclosures.

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