A lot of people have been talking about selling their shares recently due to the plummeting market values. Large drops are a part of investing though. You need to be in it for the long term or you may miss out on some of the biggest bull markets.
Over the last 25 years, NZ shares have returned a compounded average of 6.1%. Can you guess how many of those years the markets have dropped by over 15%?
The answer is just once. In 2008 during the great recession.
How many times do you think the market has increased by over 15%? 9 times!
6 of those 9 times have been after 2008. So if you were scared off by the 2008 drop, you may have missed out on many years of great returns.
This is not to say that the next 25 years will behave the same, but if history is anything to go by, there will be many more better years than bad years over the long term. Businesses are in the business of seeking continual improvement and continuous returns. If they can’t then they wouldn’t be in business.
Don’t jump ship at the first sign of volatility. Have faith in businesses and the economy and their ability to innovate and improve. As long as you follow the basics of being well diversified, dollar cost averaging, investing as per your goals and risk tolerance, and are invested for the long term, then you will do great. Have faith in the process and realise down markets are perfectly normal.
The message I wanted to pass today was to stay the course and stick through the bad times so that you don’t miss out on the good times.
All the best
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The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here