3 Charts on the Value of Staying Invested During Market Volatility
Are the recent stock-market headlines driving you crazy? The media has a great way of instilling fear based on short-term market fluctuations.
This is Temporary
The reality is, this market turmoil is simply a virus…not a terminal diagnosis.
When you visit with your doctor to treat a virus, he or she likely recommends that you let it pass. Your best bet is to stay rested and hydrated and wait for the virus to subside.
The market volatility now is no different. The current correction is largely due to concerns that the Federal Reserve has waited to long to begin cutting interest rates to boost the economy.
Whether or not this is the case likely won’t matter int he long run.
Also, keep in mind, even with the recent market volatility baked in, the S&P 500 has risen a whopping 15% over the last one year and about 9% since the start of 2024!
By staying invested over the long term, you increase your historical odds of making money in the market.
3 Charts on Staying the Course
I want to share three charts to show the importance of staying invested for the long term during down markets or periods of volatility.
Up Markets Last Way Longer than Down Markets
Going back 100 years in market history, the average bear market (downswing) lasts just 10 months, while the average bull market (upswing) lasts a whopping 52 months!
As investors, we need to endure temporary hardships to take part in more enduring upticks.
Election-Year Volatility is Usually Temporary
The stock market has risen, on average 11.6% per year during Presidential-election years compared with 10.3% per year for other years.
Markets like certainty. The front part of election years tend to be volatile as the markets face uncertainty with the upcoming election.
Historically, after Presidential elections, the stock market performs well.
In addition, the stock market has historically gone up during most Presidencies, regardless of party.
Stocks Often Rise Even After a Recession Begins
Even if we are entering into a recession, which seems unlikely, stocks historically perform positively in the two years following the start of a recession.
In fact, in 12 of the last 16 recessions in the United Stated, stocks were actually positive in the two years that followed.
On average stocks were up 8.8% in this time frame.
So, if your investment time horizon is beyond two years, then I think it’s prudent to put the blinders and wait for this storm to pass.
Doing nothing might be the single hardest thing to do. Remember, a market downturn can actually be a good thing as an investor. You can tax-loss harvest in brokerage accounts to lower your tax bill during down markets.
Do you have concerns about stock-market volatility? Reach out to me at Ben@coveplanning.com or schedule a free consultation call.
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Ben Smith is a fee-only financial advisor and CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional with offices in Milwaukee, WI, Evanston, IL and Minneapolis, MN, serving clients virtually across the country. Cove Financial Planning provides comprehensive financial planning and investment management services to individuals and families, regardless of location, with a focus on Socially Responsible Investing (SRI).
Ben acts as a fiduciary for his clients. He does not sell financial products or take commissions. Simply put, he sits on your side of the table and always works in your best interest. Learn more how we can help you Do Well While Doing Good!
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Ben Smith, and all rights are reserved. Read the full Disclaimer.