Why You Should Stay In Stocks in 2016: One Bad Trading Day Is Not the Year
The stock market has wavered recently. A lackluster year just ended, and this year has started inauspiciously. You may be wondering…should you really be invested in stocks right now? Yes, you should be.
In moments like these, investors should not panic and overreact to the headlines. Instead, they should take the long view of stock market investing. Impulsive selling now can lead an investor to try and time the market later, and market timing usually leads investors to make mistakes. On a bad day, it may seem like the whole market is falling apart—but stock market performance is not measured only in days.
Consider the following statistics, which highlight some underpublicized truths:
*Just recently, the Dow gained 7% in a quarter. The NASDAQ rose 8.38% and the S&P 6.45% in the same interval. When did this happen? The 4th quarter of 2015. Yes, the same quarter that just ended with everyone talking about how sluggish the market was.
*The S&P 500 did lose 0.73% in 2015 in terms of price return, but its 2015 total return (including dividends) was positive- a yearly gain of 1.38%.
And now, some long-term historical perspective:
*The S&P has recovered well from many of its major one-day descents. Its January 4 plunge was comparable to its August 24 drop, when it was down more than 4% during the trading session and lost 3.2% on the day to close at 1,893.21. It took the S&P just three days to recover the entirety of that big loss.
*In the 88 market years from 1928-2015, the S&P had 63 profitable years with its average yearly gain being 21.5%. So across the rough equivalent of a human lifetime, the S&P 500 has advanced on an annual basis 72% of the time.
Yes, there have been down years for stocks- severe ones among them. There have also been great years, and far more positive years than negative ones. A particular headline or economic indicator may jolt the market on a particular day, but you are not invested for one day- you are investing for a lifetime. So be patient; better days may be ahead for the market.
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This material was prepared by MarketingPro, Inc. Investment Advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Adviser. Securities offered through ProEquities, Inc., a Registered Broker-Dealer, Member FINRA & SIPC. Vision Financial Group, Inc. is not affiliated with ProEquities, Inc.