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Don’t Fear the ‘Bear’
The investment world is full of colorful terms, but perhaps none is better known than “bull” or “bear.” As an investor, you’re typically rooting for the bull market, when prices are rising. But you also want to protect yourself for periods when prices are falling. Now that we’ve entered a bear market – typically defined as a market in which stock prices have fallen 20 percent or more from their recent highs – how concerned should you be?
First, consider where we’ve just been. For 11 years, from 2009 to early 2020, stock prices kept rising, with some interruptions, resulting in one of the longest bull markets on record. During this time, stock prices rose around 400 percent – which means we entered bear territory from an extremely high point. This doesn’t mean the recent losses are insignificant, but market pullbacks present more of a pothole, rather than a complete detour, on the road to your financial goals. If you’ve been investing over time – at least a decade – you still have likely made significant progress toward your goals.
Here’s another point to keep in mind: Bear markets are a normal occurrence in the stock market. There have been eight previous bear markets since 1945, not including the current one, which have lasted an average of less than one year. The good news is bull markets have, on average, lasted five times longer. Of course, as you’ve no doubt heard, the past performance of the markets can’t guarantee how they will perform in the future.
While we can’t predict how long this bear market will last, given the ongoing uncertainty of the coronavirus health crisis, it’s highly likely a rebound will eventually emerge, as has happened before.
So, given all this, how should you respond to what’s happening? When market volatility rises and the value of your investments declines, you might feel tempted to abandon your long-term strategy in favor of one you perceive to be lower-risk. But instead, ask yourself some questions:
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones. Member SIPC.
Don’t Fear the ‘Bear’Short /Radio version:
PSA: Don’t Fear the ‘Bear’
TBA: March 27, 2020
These are unsettling times. Of course, you’re concerned about the health of your loved ones. And as an investor, you know that falling stock prices have pushed us into a bear market. How should you respond?
First, be aware that we’ve just completed the second-longest bull market in history, so we’ve entered bear territory from an extremely high point.
Also, bear markets typically don’t last nearly as long as bull markets. And while it’s impossible to predict the duration of any market cycle, history is encouraging, even though there are no guarantees of how the markets will perform in the future.
If you’re a long-term investor, your best move is to show patience by sticking with an effective investment strategy that’s appropriate for your risk tolerance and time horizon.
In the meantime, take steps to protect your physical health and that of your family and community. And protect your financial health by making sound, disciplined decisions that can help keep you on track for the long term.
This is (FA’s NAME), your Edward Jones financial advisor at (Branch address or phone #).
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