Staying Invested Matters

Volatility is normal.  The graph above shows the largest drawdowns of the S&P 500 for each year compared to the respective calendar year return. Despite these selloffs, the annual return of the market was positive in 31 out of the 41 years. In fact, going back to 1980 the average intra-year decline of the S&P 500 was -14%. 

Last year the largest peak to trough sell-off was -5%, and in 2020 the market experienced a 34% drawdown. Both years ended positive with the S&P 500 up 21% and 16% respectively.  

Do not let it derail your plans. It is extremely difficult to time the market. An investor has to make two correct decisions: when to get out and when to get back in. As the graph below points out, the best trading days often happen within a month after the worst trading days.  Panic selling can lead to missed opportunities on the upside. So next time the market makes you nervous enough to second guess your long-term investment strategy, take a step back and remind yourself that volatility is normal. 

Market corrections and recessions have and will happen. As an investment advisor we strive to provide clients with clarity and perspective so that they can stay invested with confidence.  As always, please contact us today if you have any questions concerning your own portfolio or investment strategy.