Concerned About a Corrections?
History shows us that equities markets experience a 15% correction every 3-5 years. In recent years, they are coming closer to the 2-3 year mark. Each time, the press puts a label on the reason, but I find the reasons aren’t really relevant. They are a label in an attempt to explain a very cyclical, repeatable system. Financial markets have a strong tendency over time to revert to the mean. Ultimately if returns are too robust, a slow or negative cycle ensues to get closer to the “normal averages” for that cycle. Or if returns are flat or negative for a while, markets tend to experience a positive spurt. It’s just the way they work.
Our last 13% correction was in early 2016. In 2015, we had a 12% correction; in 2011, we had 19% correction and in 2010, we had a 16% one.
If you weigh a potential 10% gain on your portfolio might be over the next year against the potential loss in a normal correction versus a 2008-event, then you can make an intelligent choice Discuss this with your advisor so you can work out an approach that works for you – one that eliminates some emotion and leaves room to assess the situation as it unfolds.