Market downturns are never easy, even for experienced investors. Nobody knows when stock prices will bottom out, and there’s a chance that this bear market could get worse before it gets better.
If you’re feeling nervous about the market’s future, you’re not alone. But downturns are a normal part of the stock market’s cycle, and there are a few numbers that could help you rest easier at night.
Despite having experienced dozens of corrections, crashes, and bear markets over the decades, the stock market has a 100% success rate when it comes to recovering from them.
Of course, there are never any guarantees in investing. But considering the market has a perfect record of rebounding from even the worst crashes in history, it’s safe to say that it will likely recover from this downturn, too.
The key to surviving a bear market, then, is to stay focused on the long term. Stock prices could fall further in the near future, but they will bounce back eventually. By holding your investments until the market inevitably recovers, you won’t need to worry as much about short-term volatility.
2. 4.2 years
Since 1929, the S&P 500 has experienced 22 downturns of 20% or more — which includes the current bear market. That means there’s a bear market approximately every 4.2 years, on average.
While that may not seem like reassuring news on the surface, it does mean that bear markets are fairly common — and temporary.
If you’re relatively new to investing, this could be your first time investing during a bear market. Even if you’ve been investing for decades, current downturns can sometimes feel worse than those in the past. After all, hindsight is 20/20, and it’s often easier to look back on previous bear markets knowing you survived them.
But this bear market will pass as well. It could potentially take months or even years for stock prices to recover fully. If history shows us anything, though, it’s that bear markets happen more often than it might seem, and they’re always temporary.
When the market is in a slump, it may not seem like it’s worth it to invest. Stock prices are sliding, your portfolio may have plummeted in value, and continuing to throw money in the market could seem risky.
However, despite short-term volatility, investing remains one of the best ways to generate long-term wealth. In fact, since 2000, the S&P 500 has seen returns of more than 166%.
Keep in mind, too, that in that timeframe, the market has experienced the dot-com bubble burst, the Great Recession, the crash in March 2020, a global pandemic, and countless other factors that could influence stock prices. Despite everything, though, it’s seen positive average returns over time.
How to keep your money safe
While it’s not always easy, the best thing you can do right now is simply push through this market slump.
If you can afford it, keep investing even if stock prices continue to fall. Double-check that your portfolio is properly diversified, which can limit your risk. Also, stay focused on the long term, and try your best to avoid getting caught up in the market’s day-to-day fluctuations.
It could also be helpful to set up automatic contributions to your retirement fund or investing account so that you can avoid frequently checking your portfolio when stock prices are down (and risk making less-than-ideal decisions out of panic).
No matter how far stock prices drop, this downturn won’t last forever. By keeping a long-term outlook, it will be easier to weather this stock market storm.
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