Do you have time to wait for stocks to recover?
Let's say you retired during an all time market high and two months later you are retired and right in the middle of a Bear Market. Wait a minute... isn't that exactly what is happening now? Why yes it is Mr. and Mrs. Client. The first question on your mind might be "Do we have time to wait for stocks to recover?"
What is a Bear Market?
What exactly is a Bear market? A Bear market simply stated is a condition when security prices 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. Sounds terrible doesn't it? Let's see what history has had to say about Bear markets.
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.
So back to the original question. Do you have time to wait for stocks to recover? If history is any guide, the answer is yes you do. So....
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 COVID-19. 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.
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.