As of the writing of this article the markets have been down the past 6 trading days in a row. The Nasdaq is off over 14% from its all time high, and it now deep into correction territory. What is an investor to do? The best advice that I can give is to not panic. Don’t sell at the bottom, and don’t pull your money out of the markets. The worst may not be over yet, but history shows that those who ride out the storm will come out winners on the other side.
Market Corrections , or a decline of at least 10%, are not all that uncommon. They occur around once every 2 years in fact. A bear market, or a decline of 20% or more, happens around every 7 years on average and can last around 10 months.
Since 2009 there have been 6 market corrections. If you are new to investing, then watching your hard-earned money evaporate can be painful, but it is not all that uncommon. The good news is that often there will be double digit gains on the other side of a market crash. The S&P 500 has routinely bounced back by well over 100% when it has corrected in the past.
Holding for the Long-term
All of this illustrates the importance of regularly investing month after month no matter current market conditions. Trying to time the market often doesn’t work for the average investor. You will most certainly miss out of large gains if you try to sit on the sidelines during a down market.
As a real-world example, I started investing in the markets in 2003. During that time, I’ve experienced several corrections and multiple bear markets. But I kept investing every month. It was hard watching my portfolio fall or flatline, but eventually I came out on top. I’ve watched my investments get cut in half more than once, but I’ve always came out with more than I started with each time.
If you have seen your portfolio, take a hit in recent weeks don’t get discouraged. Don’t panic and pull your money out either. You need to learn to just ride it out and stick to your investment plan. If you are investing in quality names that you believe in, then there is no reason to believe that they will not bounce back. Remember that slow and steady wins the race. Market downturns are a part of life. Don’t let it scare you. The markets have been down, but one day they will be back up.
Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.