Market Corrections Are Part Of Investing
Friday's stock market selloff is getting everyone's attention. The market, as measured by the Down Jones Industrial Average, plunged 530 points, representing a 3% loss for the day and 10% off the market's high in May. Most of the selloff appears driven by fears about China's sputtering economy and concerns about how it may spread globally.
We know that the recent days in the markets are uncomfortable. We are right there with you. Our own portfolios are invested like our clients. A strategy of broad global diversification appropriate to your individual financial plan and goals is the right trusted strategy. A long-term perspective is imperative, keeping costs low and using science to invest in the market's various global dimensions to capture more of the market gains.
As noted, market corrections are part of investing. Since 1900, there have been 35 declines of 10% or more in the S&P 500. Of those 35 corrections, the index fully recovered its value after an average of about 10 months. So, our advice is to keep a patient perspective and invested. The S&P 500 more than doubled in value from March of 2009 through 2013 with an average annualized return of more than 20%. Over the last few years we've seen outstanding results but markets do not move on a smooth path higher - or lower. With long-term average historical returns of the S&P 500 of about 10%, it's not unexpected that we experience markets retreating after times of higher gains. We also know from data and research that trying to predict when markets will rise or fall is nearly impossible for any investor.
With corrections come opportunities as well. We'll be rebalancing taxable portfolios for tax loss harvesting opportunities as that helps increase returns and reducing taxes. And above all, reduced prices are also a buying opportunity. With investing there are never guarantees but the returns in the market over the long run are key to help us reach our financial goals. Please do not hesitate to contact us with any questions or concerns.
