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Beat the odds by staying invested
Posted: April 10, 2009 (Originally published: September 10, 2008)
Your clients may be thinking about cashing out, but is it their best option?
Difficult times in the market can make it tempting to take one's losses and cash out. It's a natural reaction, but unfortunately, not one that has yielded great investment results over time. On the other hand, defying the counsel of fear and staying invested has proven to be a better strategy time after time.
In the chart above, we examine bull and bear markets in the U.S. (as measured by the S&P 500) since 1926. As you can see, there have been several periods of significant losses, most notably during the 1930s. After each of these periods, however, the market has rebounded substantially, often returning several times the amount lost in the prior downturn. Additionally, bull markets have on average lasted much longer than bear markets—up to 10 years. Accordingly, we believe long-term investors can best beat the odds by maintaining their investment objectives and discipline. Of course, investors should review their strategy with their financial advisor and take appropriate action. But in many cases, winning in the market means not walking away—even when the dawn is still dark.
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First used April 2009
RFS 09-1860