Having Patience Through Market Volatility


It’s no secret that the stock market has been exceedingly volatile lately. You may be wondering how this volatility could affect you. Should you sell? Buy? Worry? Wait?  Don’t panic.


Hasty, speculative decisions aren’t advisable in any market. While no one is able to predict the future, we are able to look back carefully at the history of Wall Street.  Judging by that history, I expect the market is likely to rebound as it has so often in the past.  The market has certainly seen its share of turbulence through the years, and it often discovers its own remedy. If you were around for Black Monday in 1987, you probably recall the widespread panic that followed. But, you may also recall that in less than two years, the market had sprung back, fully regaining the value it had lost by September of 1989.


Do you remember where the Dow was in 1982? It was in the high 700s. By the start of 2000, it had grown more than 1,500% to sit well above 11,000. In 2003, the Dow was below 9,000; it is still well above that today.  Fluctuations and corrections happen, but the key is to retain long-term faith and stay invested through the turbulence.


Human nature often leads us to be slightly pessimistic, and when that happens, your instinct may be to go into self-preservation mode. But consider your decisions before you act. Will they actually help you to grow or preserve wealth? Or could they someday work against you?  Consider this:  while the market may be far down now, do you remember when it reached its all-time high? You should, it was only a few weeks ago.


While the market dropped more than 340 points one morning, it made almost all of it back in a couple of hours of late-afternoon trading, to finish down by only 13 points. This is the new Wall Street: the markets are capable of amazing rebounds, and amazing gains.


I tend to encourage long-term investment strategies in order for clients to achieve their goals. When I say long-term, I don’t mean just a few months, I mean several years. So, if the market corrects itself within the next year or so, those who make hasty decisions to sell now may not fare as well as those with patience.  After all, more often than not it tends to be the long-term investor who sees the greatest accumulation of wealth in the long-run. History has shown that timing the market is not the recipe for growth. Instead, it is the time you spend in the market.


Since the mid-1920s, the stock market has posted annual gains about 70% of the time (58 out of the last 81 years). In fact, as is often noted, if you had been out of the market on the S&P 500’s top five best-performing days since 1980, you would have a portfolio worth about 25% less than if you had stayed fully invested, and if you had missed the S&P 500’s best 30 days, you would have a portfolio worth nearly 75% less. However, past performance is not an indicator of future results.


Stay the course.


Information provided courtesy of Carol Kinder. Securities offered through First Allied Securities, Inc., A Registered Broker/Dealer Member: FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc. A Registered Investment Advisor.