5 Insights to Stock Market Declines

Few things are as universally stressful as stock market volatility. And during these periods of volatility, many folks start to have doubts about their long-term investment strategy. Some investors make the mistake of pulling their money out of the market when they get nervous… which only serves to lock inany loss they’ve incurred.

While past performance is no guarantee of future results, historically, the stock market eventually bounces back and rewards those who ride out the storm. To quote investment guru Warren Buffett, “The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.”

If you’re feeling itchy about market volatility, click to read this helpful document from Capital Group, “Keys to prevailing through stock market declines” It includes some useful historical data and multiple tips that can help you feel more confident about your decisions.

If you have any questions or concerns about your long term investments please don't hesitate to reach out.

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Quick Overview

Here is a quick overview of this 4 page read with some interesting charts. It covers the problems, solutions, and history surrounding the topics below.

1. Declines have been common and temporary occurrences.

Problem: Declines can cause imprudent behavior by filling investors with dread and panic.
Solution: Realize that declines are inevitable and have not lasted forever

2. Proper perspective can help you remain calm.

Problem: Studies show that people place too much emphasis on recent events and disregard long-term realities.
Solution: Even amid a market down turn, remember that stocks have rewarded investors over time.

3. Don’t try to time the market.

Problem: Research has shown that losses feel twice as bad as gains feel good.
Solution: Keep in mind that fleeing the market to reduce losses could mean losing out on gains when stocks recover.

4. Capital Group, home of American Funds, has helped
investors prevail through market declines.

Problem: Market indexes don’t tell the whole story and can needlessly alarm investors.
Solution: Consider investing in funds run by investment managers who have proven long-term track records.

5. Emotions can cloud your judgment.

Problem: Investors often make poor decisions when they let their emotions take over.
Solution: Stay focused on your long-term goals and carefully consider your options.