Don't Fear the Bear
Search
Share This Page

Don't Fear the Bear

Dont Fear the Bear

The investment world is full of colorful terms, but perhaps none better known than “bull” or “bear.” Investors typically root for the bull market, when prices are rising. But will also want to protect themselves for periods when prices are falling. Now that we’ve entered a bear market — typically defined as a market in which stock prices have fallen 20 percent or more from their recent highs — how concerned should you be?

First, consider where we’ve just been. For 11 years, 2009 to early 2020, stock prices kept rising, with some interruptions, resulting in one of the longest bull markets on record. Stock prices rose about 400%, meaning we entered bear territory from an extremely high point. 

This doesn’t mean recent losses are insignificant, but market pullbacks present more of a pothole, rather than a complete detour, on the road to your financial goals. If you’ve been investing over time — at least a decade — you’ve likely still made significant progress toward your goals.

Bear markets are normal. There have been eight previously since 1945, not including the current one, that have lasted an average of less than one year. The good news is bull markets have, on average, lasted five times longer. Of course, as you’ve no doubt heard, past performance of the markets can’t guarantee how they’ll perform in the future.

While we can’t predict how long this bear market will last, given the ongoing uncertainty of the coronavirus health crisis, it’s highly likely a rebound will eventually emerge, as has happened before.

So, given all this, how should you respond to what’s happening? When market volatility rises and the value of your investments declines, you might feel tempted to abandon your long-term strategy in favor of one you perceive to be lower-risk. But instead, ask yourself:

Have my long-term financial goals changed?

You’ve probably had your long-term goals for quite some time. For example, perhaps you’ve always wanted to retire at a certain age and spend part of the year in a different location. Do you still have this goal today, despite all that’s happened in the markets? 

The answer is likely yes. If that’s the case, you probably don’t want to abandon the investment strategy you’ve been following, especially given the unique nature of the current market volatility. 

Am I comfortable with my risk tolerance? 

Some investors know markets will go through occasional shocks and can live with this, but others worry to the point that it negatively affects their quality of life. If you are in this second group, you may need to re-evaluate your risk tolerance and adjust your portfolio accordingly.
These are challenging times for all of us, as we think about the health of our loved ones and our ability to achieve our financial goals. But it’s important to have confidence that the current health crisis will eventually pass, and that normalcy will return. And as an investor, remind yourself that investing for the long term requires patience and discipline.

 

Kevin Chancellor is a licensed financial advisor who specializes in helping individuals, families, and business owners in the areas of retirement planning, tax savings, estate considerations, and education savings. He has served as board chair for the Greater Palm Bay Chamber of Commerce and works with various charities throughout the county. 

Kevin Chancellor
www.blacklabfs.com
kevin@blacklabfs.com
 

 

Read more articles in our Digital Magazine.

« Back

Violets in Bloom Florist L.H. Tanner Construction Buena Vida Estates Palm Shores Bistro Richard's Paint Salon Madeleine