- If you have a financial plan, staying invested is part of the plan. If you’ve created a financial plan, and a balanced portfolio to reflect it, you should already have built in the necessary stops for dealing with times like these. By riding out planned-for risks, you can expect to eventually reap their planned-for rewards. If you instead abandon your plan in a downturn, you end up experiencing the risk anyway, but never receiving the expected reward.
- Bear markets begin … and end. Bear markets are always tricky. The particulars are always different, making each one scary. But their commonalities are telling. We rarely know they’re coming until they’ve arrived. We don’t know they’re over until we’re well into recovery. Since no one knows where the top is, and no one knows where the bottom is, the safest strategy is to stay invested throughout.
- Your investments can’t recover if you’ve sold them. Here’s another thing we know about markets: When they do recover, they usually do so quickly, dramatically and unpredictably. We can see spurts of 10%, 12% or more in a day. If you stay invested, your holding values will decline during the downturn, but they’ll be there for the full recovery when it occurs. If you’ve instead realized losses during a bear market, they’ll be permanent losses. Plus, you’re likely to miss out on at least part of the recovery by not getting back in before it occurs.
- Your future self will thank you. While this is inarguably a scary time, it’s far more likely to be a footnote in the history of your investment journey, than its destiny. Someday, you’ll look back on the current crisis with a different, more informed perspective. Based on decades of historical market performance, we’re willing to wager that your future self, with its 20/20 hindsight, would tell your current self to stay invested for now. In fact, if you’re especially risk-tolerant, you may even want to take advantage of the reduced prices, and “stock up” on stocks.
While you’re waiting for this bear market to pass, we hope you’ll check out our “Think Smart” podcasts, including the one that inspired today’s post, “Coronavirus: Working from Home.” In the podcast, we also discuss some of the measures we’re taking here at The McClelland Financial Group to keep our clients and ourselves safe. Let us know if we can assist further.