Why Downturns Are ‘a Real Opportunity to Create Wealth’

Last week, the U.S. stock market finished its best week since 2009, with the S&P 500, a major benchmark for the overall economy, up 10 percent. In normal times, a move like that would be something investors would be more than happy to get in an entire year, let alone in a few days.

Of course, context is important. Amid concerns about the health and economic toll of the coronavirus outbreak, the S&P 500 remains in a bear market, defined as a decline of at least 20 percent from a recent high. And the index dropped again this week: as of April 1, the S&P was down about 27 percent from its February 19 high. But perspective is crucial:

“We will get through this,” says Skip Johnson, co-founder of Great Waters Financial.

He and other experts caution that selling right now could be the most expensive mistake of your investing career.

Here’s why.

‘Decades matter’

The current bear market is the sixth for the S&P 500 since 1970, according to data compiled by Yardeni Research. Looking back at those past five downturns, there’s been a consistent theme: The S&P 500 has always recovered and gone on to new highs. Within a decade of each bear market, the index had gone on to gain an average of nearly 240 percent, according to FactSet data analyzed by Grow.

“What’s happening now doesn’t matter; decades matter,” says Nick Yrizarry, president and chief executive officer of Align Wealth Advisors. “No matter, through thick and thin, you stick with it,” he says.

Investors who continue to invest will find a stock market with lower prices, offering a greater chance of future returns. “That’s where your success is going to come now,” he adds.

Learning from this sell-off

This may be the first bear market you’ve experienced as an investor. But you can expect a handful of these over the next decades.

“For those investors who are kicking themselves asking, Why didn’t I get out?” says Tom Stringfellow, the president and chief investment officer of Frost Investment Advisors. “The reason is simple: There was really nothing out there that said this could happen so quickly.”

Timing the market is nearly impossible. Remember: You’re investing for the long haul. “Changing market conditions doesn’t mean you change your investing philosophy,” Johnson says.

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