For those of you who have been clients for some time, you may already know what I may say to the question posed in the title: “WHICH MARKET”? Will a market or even a group of markets go down 20-30% at some point. Absolutely yes. But it’s not likely they all go down at the same time. We build portfolios to be non-correlated which means they are designed to not be all moving in the same direction at the same time. In addition, you may own, like I do, other assets like fixed income and cash value life insurance which do not move in concert with equity markets. So generally, you can rest assured that even when markets do go down, not all of your money is at risk.
Now to the overall question of markets going down…YES…markets will go down again. When? I have no idea. But no one knows that. Some in the financial newsletter industry or media continue to speculate and guess as to when. By doing so they set themselves up to eventually be correct and then they will broadcast how they picked the top of markets. But the reality is that no one on this planet knows exactly when markets will go up or down.
I think it is important for you to remember that free markets work. In a free market, the equity markets produce returns known as “risk premiums”. You must take risk to get the premium. The risk is evident when markets go down and while it’s not enjoyable (like turbulence on an airplane) it’s proof that you are being compensated for the risk you took. If markets only ever went up, there would be no reason for companies to pay you so well to use your capital to build their businesses.
So sit, back and enjoy the ride. Sometimes it will be bumpy. But remember, if the pilot only told you that the ride would be smooth, then every bump on the airplane would freak you out! It won’t always be smooth. That’s normal and it’s ok. When the stock ride gets bumpy, remember the same thing…it’s normal and it’s ok.