Turmoil in Equity Markets
The U.S. stock markets have been in a tail spin and have been classified as a “bear” market ( A bear market is defined as a period when stock index prices drop at least 20%).
Since World War II there have been 13 bear markets. One occurring about every 5 years with an average duration of 2 years. In every one of these occasions the media tried to convince the public that the sky was falling and the world was ending. As always it was not true. In each case buyers of stocks profited handsomely on the next wave upward.
Should you sell and “panic out” of the markets??? NO! Here is my approach.
For instance, I don’t believe I can time the equity market, in the sense of being able to go in and out opportunely. So I never have to spend any time trying to anticipate the markets, nor change my portfolio in anticipation of market movements. Buy-and-hold, for all its tribulations, is therefore a bedrock principle to me. Equity diversification – I can’t make a killing, but I can’t get killed, either – is another such principle. So I don’t have to spend any time or energy trying to figure out whether to overweight growth or income, small-cap or big-cap, Poland or Peru. Minutia has no attractions for me; principles do.
Every empirical study shows that the long term investor always wins.