There’s an image in people’s minds of the stock market being a roller coaster. In other words, you start at one point, go through a wild ride with a lot of ups and downs, twists and turns, and then, at the end of the ride, you basically don’t feel well and end up in the same spot.
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Market-related anxieties, fears, and hopes are always going to be out there — along with headline news stories. The headlines might make your head spin. Stop worrying! These concerns are already factored into the price of the stocks and businesses.
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In the last six months of 2018, the S&P 500 of the Dow Jones dropped about 20%. And since Christmas Eve, which marked the bottom of the drop, the market has rebounded most of its losses. So the question people are asking is: What do we do now?
If you want to get excess returns in the market, expect volatility and price fluctuations. You cannot have one without the other.
The alternative is to buy a Treasury Bill or a money market fund; but if you want a higher rate of return, you have to be willing to accept more risk. Bull and Bear markets will cycle; and while it’s never comfortable when the market drops, just remember that the market is priced to provide investors with a return each and every day. Continue reading
“I have found that the importance of having an investment philosophy—one that is robust and that you can stick with— cannot be overstated.”
—David Booth
The US stock market has delivered an average annual return of around 10% since 1926 (1). But short-term results may vary, and in any given period stock returns can be positive, negative, or flat. When setting expectations, it’s helpful to see the range of outcomes experienced by investors historically. For example, how often have the stock market’s annual returns actually aligned with its long-term average? Continue reading