I’m Michael Evans for Cogent Strategic Wealth. In recent weeks, the dramatic increase in volatility due to the coronavirus, in the world stock market, has resulted in volatile markets and renewed anxiety for many investors. The world is watching with concern. The uncertainty is being felt around the globe and it’s unsettling on a human level as well. All of these, including the downturn moves in the world stock market, adds to the uneasiness as we go through the coronavirus together. An antidote to this plan is taking a long term-term perspective as an investor, of how markets have responded in the past to sudden downturns, may just be helpful. You can have hope.
From a chart that you can see here, we can see what happened in a one, three, and five-year average to the US stock market following a steep drop draw-down. I’ll share three takeaways from what we’ve observed in this data. First, broad US market, going back to 1926, shows that stocks have generally delivered strong returns over the one, three, and five-year periods, following steep declines. Second, just one year from a decline of 20%, those returns of the US stocks were higher than the long-term average of 9.6%. Third, looking three and five years later, after a sharp decline such as this, the annualized returns were much higher than the long-term average to get taken collectively.
Now, past performance is no guarantee of the future, but it is so trying to remain calm during substantial market’s decline as those. It’s important to remember that volatility is a normal part of investing. Unfortunately, building wealth has no shortcuts. Successful investing requires a solid investment approach. For long-term investors, reacting emotionally to markets like these may be more detrimental to your portfolio than the performance of the downturn itself. Be certain that life is uncertain. The stock market is even more precarious.
This means that building wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and the discipline to stay the course. Instead of leaving your financial future to chance, you need to have a plan.
Cogent Strategic Wealth is here for you. Instead of worrying about the future, why not take positive steps to protect it? Set up a Cogent Conversation of your own today.
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