Unless you’ve been living under a rock, you most likely know the stock market is looking like a roller coaster at Six Flags, with not one, but two major market corrections this year. However, before you sell everything and jump ship, you need to know the numbers—the REAL numbers, and remember you cannot beat the stock market.
First, we’ve been in this bull market for almost ten years running at this point, which is now the longest in history. Since the low over nine years ago, the market has seen a 300% increase, with record highs numerous times.
When you look at the year-to-date stats, both the Dow Jones and S&P 500 are both down just one percent. Additionally, when you factor in the EAFEI, which is foreign stocks, you see a much sharper 12% decline. The NASDAQ’s showing is even worse with 87% of those stocks down 10% from the highs.
Unfortunately, it doesn’t stop there. Gold is down six percent. If real estate is your investment area of choice, those numbers have decreased by four percent, just like the bond market. Basically, if you’ve invested money this year, it’s entirely possible you lost everything you may have gained since January.
However, once you put all of these numbers into perspective, your losses may not really be something to fret over. While I’m not making lite of your losses, I do want to point a few vital pieces of information. Did you catch that percentage on the DOW and S&P?
So, assuming you’ve invested this entire bull market, the 300% increase you’ve seen in the last nine-plus years had declined by just one measly percent! Oh, and get this—oil is up 11%, meaning not everything is declining. Somethings go up, and some go down. That’s the nature of investing! And since you can’t predict what investments that will be, you must diversify—stocks, bonds, natural resources, foreign securities, precious metals, etc.
I know its cliché, but NEVER put all your eggs in one basket. When you buy stocks, don’t just pick out the top performers of the day. Buy some of the lower performing stocks as well. You never know when they will have their moment in the spotlight. By diversifying your portfolio, you are eliminating some of the risks you take on when you invest.
The market is going to do what the market does. I’ve said time and time again; a correction is coming, and we’ve already seen a few. It doesn’t mean you sell everything you own and run for the hills because the end is near. What it does mean, is that you need to sit down with your CERTIFIED FINANCIAL PLANNER™ and look at your long-term goals.
Ask yourself if you’re on track to achieve what you set out to do with your investments. Will you have enough for retirement? Can you cover your long-term care needs? Is there an adequate amount to send “Johnny” to college? Knowing the answers to questions like these, allow you to work backward and determine if your strategy is lining up with your aspirations.
No one can time the market. Not even top-notch hedge fund managers can’t predict what the market will do from one day to the next. History shows, the only way to attempt to beat the market is to own a portion of the market and let the market do what does.