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Stock Market Correction Update

Rather than try to predict the downturns, we plan for them.

December 07, 2018 • 2 minute read
BrightPlan Blog

Stock markets have been choppy lately, with the S&P 500 off more than 10% from its highs. A decline of this nature is broadly labeled as a “correction.”

While it’s never fun to see your portfolio take a hit, losses are a normal part of investing. During bull markets since 1945, on average the S&P 500 has experienced:

  • a pullback of at least 5.0% once every year,
  • a correction of at least 10.0% every 2.8 years,
  • a bear market decline of at least 20% every 4.7 years.

We realize that being a long-term investor is easier said than done, because the long-term feels like an eternity in the moment. In our 35 years serving clients, we’ve dealt with our fair share of downturns. Rather than try to predict the downturns, we plan for them.

Remember the Big Picture

If you’re still feeling uneasy about the market falling, consider the chart below. It shows how relatively short bear markets are compared to bull markets. Notice that the length and gains of a typical bull market (blue) are disproportionately greater than the length and severity of bear markets (orange).

bull and bear markets graphic

Trying to avoid the bear markets means sitting in cash and missing out on the disproportionately greater gains. Rather than worry about avoiding relatively short-lived downturns, as difficult as they feel in the moment, you must focus on the things we can control to capture all the returns the market offers in the good times.

If you are nervous about the market, you are better off reviewing the underlying assumptions in your financial plan than making changes to your portfolio. Review your goals in BrightPlan to see whether anything changed. If a goal needs attention, we provide advice to bring it on track. If you've invested with BrightPlan, take advantage of your access to a financial advisor by scheduling a meeting.

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