What if you retired during an all time market high in January 2022 and six months later you are retired and right in the middle of a Bear market? The first question on your mind might be "How long do Bear markets last?"
What is a Bear Market?
What exactly is a Bear market? A Bear market simply stated is a condition when security prices (stock market) fall by 20% or more from recent highs. A Bear market is typically accompanied by high pessimism and negative investor sentiment. Bear markets also may accompany general economic downturns such as a recession. We are in a recession right now regardless of how the media tries to spin it.
How long do Bear Markets last?
Since 1948, there have been 10 Bear markets U.S. excluding the one we are in right now. The average number of years from the peak of the Bear market to the recovery, meaning the time it took for the S&P 500 to climb back to its previous highs was 3.9 years and the median/midpoint was 2.7 years. On five of those occasions, the market recovered in 2 years or less! In other words, market downturns feel much longer than they actually are.
What should I do while I wait for stocks to recover?
Market downturns tend to provoke extreme reactions and make us feel out of control which leads to the feeling that we must do something and we must do it right now. But should we do anything?
One thing you could do is re-balance your portfolio? Maybe now is the perfect time to actually buy some of the stocks that have been beaten down in the last few months because of this recession. Sounds counter intuitive right? However, you can buy more shares with your money now than you could two months ago. If you are unsure what to do here or how to do it, feel free to contact us to see if this is something that might be advantageous for you and your portfolio.
Another thing you could do is nothing. That's right don't do anything at all. When markets are in turmoil like this never underestimate the value of doing nothing. Sometime it's a great idea to sit and think. Sometimes it's a better idea to just sit.
When markets are in turmoil like this never underestimate the value of doing nothing. Sometime it's a great idea to sit and think. Sometimes it's a better idea to just sit.
At 80/20 Financial, we can help you plan your retirement. We are retirement planning specialists. We will never promise you that we can beat the market, but we can help you not to get beaten by the market. If you would like a second opinion on your current retirement strategy please contact us. We would be honored to work with you.
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