· You cannot time the market. Calmer heads are created by years of experience as an investor and knowing important facts.
Since 1929, there have been 25 Bear Markets. The average Bear Market lasted 10 months. The average bear market loss was (35%). The smallest loss was (21%), and the largest was (62%) in 1932. The average frequency of Bear Markets is every 3.4 years. The last Bear Market ended in March 2009. Therefore, we are way overdue.
Since 1929, there have been 25 Bull Markets. The average Bull Market lasted 31 months. The average Bull Market gain was 104%. The smallest gain was in 2001 and was +21%. The largest gain was 582% from 1987-2000. The average frequency is every 3.4 years. The present Bull Market is over 72 months old and a pullback is necessary.
· Things are never different. People incorrectly say that “this time things are different.” Their intent is to explain that the fundamental rules and principles of investing have somehow changed this time around.
For example, had investors not believed that “value investing” had become obsolete from 1995-2000 and bought dot coms with stretched valuations, much money could have been saved. They justified their actions by saying that the old principles of investing didn’t apply and that the technology revolution justified the crazy prices. They were wrong.
· Turn off CNBC and leave the worrying to us. Part of hiring an investment advisory firm is to allow us to act in your best interest and for you to do other things.
· Have enough cash and fixed income investments to make the moves in the market of little concern. This allows you to be a long term investor in stocks and reap the rewards.
· Own investments that have been through the ups and downs of the markets and have been fine.
For example, American Express Company (AXP) traded at $9.71 during the financial crisis on March 06, 2009. It has been as high as $93.17 in early January of 2015 and closed today, 1/13/16, at $62.85. As an intelligent investor, you must ask yourself: was AXP really worth 6-700% less than today, just 6.75 years ago? No, of course not. These are the results of the extreme movements of the market in irrational market panics!
· “Buy right and hold tight.” This quote is from John Bogle’s 10 Rules of Investing. A simple investment strategy with proper attention paid to liquidity needs, risk tolerance preferences and proper asset allocation can be much better than more complex expensive strategies.
Simply refer to these commandments every time you feel emotional or nervous about the market, you will save yourself a lot of time, worry, and money.