It Pays to Stay!

It Pays to Stay!
16 Dec 2015

It’s easy to let the emotions of greed and fear drive our investment decisions. I once heard another financial professional say, “We don’t have people with investment problems, we have investments with people problems!”

I do see some truth to this. To be fair though, it’s easy to see why investors repeat bad investment behavior. After all, we are human. I mean, if somehow we could remove the emotions of greed and fear, I do believe investing would become easier. But we all know that this won’t happen anytime soon.

Let’s look at the chart below provided by First Trust and sourced from Bloomberg.

The key point is that the majority of the time, after a major 1 day decline in stocks (S & P 500), the index was substantially higher after 1, 5 and 10 years.  While stocks have often experienced extreme volatility in the short term, I believe investors are better served committing to their longer term goals. Of course, past performance is not a guarantee of future results…

Chart

Data Source: Bloomberg. Performance is price return only. Returns are average annualized returns, except those for periods of less than one year, which are cumulative. The historical figures for the S&P 500 Index are for illustrative purposes only and are not intended to imply or guarantee future performance. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. These returns were the result of certain market factors and events which may not be repeated in the future. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The index can not be purchased directly by investors. This information was prepared by First Trust Portfolios, L.P. Member FINRA/SIPC. – See more at: http://brown-tedstrom.com/sp-500-performance-after-its-worst-days/#sthash.6iuqOITJ.dpuf
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Jeffrey Johnston

Jeff has over 30 years of experience in the investment industry. He currently holds his FINRA Serices 6, 63, 66, 7, 24 & 51 licenses with LPL Financial as well as his health and life insurance licenses.