Last year – 2018 – was the worst year for equities since the collapse of the markets in 2008. In recent months, the market has plummeted by almost 20%. Most of the forecasters were convinced that the winter was finally here and a bear market was here to stay. Yet since Christmas, when many investors decided to withdraw money and stay on the sidelines to "wait," the market rebounded by 2,000 points and made the market timers again ridiculous. UNFAILING (published end of 2016), it was the type of market we had in mind. We were in an extended bull market, the longest in history, but we knew the market would do what the market always does: correct or collapse. Let's be clear: no one knows how to time these downswings. As Warren Buffett puts it, forecasters only exist to look good at fortunetellers. But that does not make their predictions less heartbreaking. When Tony sat down with Vanguard's founder, Jack Boglewho has been investing for 65 years, asked the investment legend how he handled such moments because he also suffered from heartburn."How do I feel when the market drops 50%?" he rhetorically asked. "Honestly, I feel miserable. I knotted myself in the stomach. So what am I doing? I'm going out a few books on "stay the course" and reread! "So how can one be steadfast and make the right decisions in these tumultuous times? The first step is to arm yourself with facts. In our book, we describe the seven "Freedom Facts" designed to give you both a sense of emotional freedom from anxiety and a tactical guide to making good decisions. The reality is that these recessions can present significant opportunities for wealth creation for those with intestinal strength. So, let's cover the three most important facts about freedom here:On average, corrections have occurred approximately once a year since 1900The corrections, defined as a decrease of more than 10% but not more than 20%, occur at a remarkable frequency: once a year on average. The last decade has been a lot softer and our short memory tends to forget these frequent tremors. Corrections are usually short-lived and last only 54 days on average. The good news? Only 20% of corrections turn into bear markets. This means that four times out of five, the market picks it up and goes higher. Bear markets (which drop more than 20%) occur every three to five years on average. If you are 50, you can live six or seven (or more) in your life! So, although the US market has always reached new heights, these difficult times are simply part of being an investor – a pill that is hard to swallow but must be swallowed if you want to maintain your mental health. It's better to kiss him like a storm that will pass, or better yet, to see the opportunity that presents itself.No one can predict constantly whether the market will go up or downThis one is quite simple to understand but more difficult to ignore, given the current context of the new 24 hours. Many forecasters will tell you that they have accurately predicted the correction of X or the Y crash. But keep in mind that even a man with a broken watch is correct twice a day. As wise wise man Jack Bogle says: "Of course, it would be nice to get off the stock market and go back down, but for 65 years, I have never met anyone who knows how to do it, I have never met anyone. who had met someone who knew how to do it. " Lesson? Making decisions to enter the market and get out is a recipe for losing money in the long run, not to mention its extreme inefficiency from a tax perspective. Which brings us to the final and most important thing to remember.Stock market rises over time despite many short-term setbacksThe S & P 500 Index experienced an average intra-annual correction of 14.2% from 1980 to the end of 2015. But do you know what really surprised us? The market ended up generating a positive return in 27 of those 36 years. It's 75% of the time! And the chances that the market is up in a 10-year period is fine above 95%. The market is incredibly resilient because US companies are incredibly resilient. In his 2015 letter to Berkshire Hathaway shareholders, Buffett explained"This omnipotent trend will continue for sure: the economic magic of the United States remains alive and well. For 240 years, betting against America has been a terrible mistake, and this is not the time to start. "The story continues
It sounds pink, but what about today? Why does the market fall like a stone? These are just questions. The market is really concerned only with one thing: anticipated profit. No matter what companies have done in the past, the market is only concerned about the expected future profits. The stock price of a company is simply a reflection of this buying power. The market is growing by anticipating that future earnings will be good enough to justify the price per share paid today. It also declines if it expects future earnings to be lower, as the market sees many factors that may negatively affect future results. These factors include everything everyone is talking about, including interest rates, tariffs, and political unrest. In summary, the market is concerned that the combination of all these things, to varying degrees, will make companies less successful in the future. The market fears what economists call a recession. That's why it's important to note that, even as we discuss US markets, most smart investors will not only invest in US companies. A globally diversified portfolio with various asset classes is essential to smooth the trajectory. So, how does an unshakeable investor see these uncertain times? The unshakable investor recognizes that the stock market is the only thing that people do not tend to like when it's on sale. The unshakeable investor sees in bear markets an opportunity to put money into action or rebalance other asset classes into less expensive stocks. For example, the Dow Jones was 6,507 on March 9, 2009. Today, we are over 23,000! Those who remained unswerving bought shares with significant discounts and reaped the rewards. We must remind readers that these strategies are not for everyone, and that individuals should consult a professional before making any decisions. investment, but what we are trying to do is that to become steadfast it is not to be zen at the heart of the storm, but rather to take positive steps that could significantly accelerate the recovery of portfolios when the market will resume its ascent. Take the time to learn about how the markets work and how to take advantage of this period of volatility so you can rest easy on your path to financial freedom.