Bear markets can certainly be scary times for investors, and nobody enjoys watching the value of their portfolios go down. However, it’s important to remember that bear markets are a normal part of the market cycle, and not let panic sway your decision-making. A market decline should be viewed as a potential opportunity to put money to work for the long run while stocks are trading at a discount.
Listen for the knock of opportunity
For those that are waiting on the sidelines with cash that you might be looking to deploy over the long term, it is very important that you focus on time in the market vs. timing the market. Statistically, it is impossible to time the market from an entry and exit perspective and result in better returns than one that takes a buy-and-hold type of approach.
Instead of trying to time the bottom, we advise clients to invest with an incremental approach and build their stock positions gradually over time. Consider an initial investment of 25% of your investable cash, followed by equal increments over the subsequent 1, 2, and 3 months. Establish a structured approach to investing and avoid undue concern thereafter.
Stick to a plan
Having a plan and sticking with that plan is essential. The average investor significantly underperforms the overall stock market over the long run, and the primary reason is investor psychology and emotional bias. It can be easy to get sucked in by scary media headlines, make your investment decisions based on your long-term goals and objectives. Invest in stocks that you want to own for the long run, and don’t sell them simply because their prices went down in a bear market.
We hope you enjoyed this month’s Client’s Corner. Please do not hesitate to reach out if you have any questions or feedback.
Thinking about hiring a professional to help you implement a long-term financial strategy? We would be more than happy to set up a 30-minute discovery call to get a better understanding of your unique situation.
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