The past few days have been turbulent on Wall Street, and it’s been years since we’ve seen this kind of fear among investors. But don’t panic. The best way that I know to combat the fear of a down market is to look back in history and realize that the stock market is an upward reaching entity which occasionally takes a break and hovers at lower elevations for awhile.
Let’s look at the stock market’s history which is the only guide we have. The graph below illustrates every up and down market from 1949 through the end of 2014. Viewing this graph, it becomes evident that up markets far exceed down markets when measured by the percentage of rise and the number of years the markets rise.
For instance, there was a total of 780 months during that 65-year period and 606 of those months were up months for the market; conversely, there were 174 down months. The bottom line is that during this 65-year time period, the S&P 500 index returned 11.5%.
If you’re still anxious, my advice is always the same: stay disciplined, goal-oriented, and diversified. That’s the best way to navigate these market storms.
Up Markets Greatly Exceed the Down Markets/Change in the S&P500 (1949-2014)