It's Always Something...... Just when Investors think it's a free-for-all mania in the Stock Market the old ugly risk shows up in some form or the other!
The bottom line is there is no respect for risk in the equity markets and mania could not be indefinitely sustainable, there is never a permanent plateau.
Discipline like paying attention to your timeline of goals, re-balancing portfolios to desired risk, frequently and paying less attention to the run up of specific holdings or sectors becomes the saving grace in market surprises like the market is currently experiencing. Don't ignore the attention to tax efficiency on after investments because anxiety of a selloff creates tax liability on those investment at the end of the year. Probably the most important advise, is get back to basics and remember 91% of returns come from true diversification. Every investor is a genius when markets are on the up swing with little volatility, not so much in a correction.
Market Corrections: More Common Than You Think!
- Equity markets around the globe fell into correction territory on intensifying concerns about the coronavirus.
- On average, a correction in the U.S. stock market occurs every year or so and takes about three months to recover.
- Despite the concern that corrections tend to cause, they are necessary for the health of the overall market.
On February 27, 2020, barely two months after returning an impressive 31.49% gain for 2019, the S&P 500 Index fell into correction territory—that is, when a stock-market index declines by 10% or more from its most-recent high. The drop was triggered by a sharp rise in fears about the China-born coronavirus and the impact of its rapid spread on the global economy.
It’s understandable that investors may be alarmed by such a dramatic market plunge, but it’s important to recognize three important facts about stock-market corrections:
Exhibit 1: Corrections are Common