As to be expected, many investors are feeling a sense of fear with regard to the recent stock market drop attributed to the coronavirus. Prior to the arrival of the coronavirus, everything indicated the economic environment was robust enough to continue to support the market. Investors are receiving no favors from the media who continue to hunt for headlines, and this fear mongering, instead of factual reporting that would actually be helpful to the public, is exacerbating investor fears.
Setting aside my personal distaste for what the media has become, let’s look at what rational investors should know. First, at some point, we (our scientists and medical professionals) will gain the upper hand on controlling and curing this virus. Second, the market has had a very good ten-year run, and as it always has, it gives some of those gains back with periodic corrections. In 1987, the single largest drop in history was recorded…down 508 points, or 22.6%. Within two years, the market had fully recovered…
Which brings us to our most important point…you have to take that part of your asset allocation dedicated to the stock market, and stay invested. Why? Here are the numbers for 1999 – 2018, a period that includes the 2000 Tech Wreck, and the 2008 Financial Crisis:
Growth of a hypothetical investment of $100,000 invested for 20 years in the S&P 500 Index:
You miss the 25 best days in this period…$82,256
You miss the 15 best days in this period…$127,102
You miss the 5 best days in this period…$214,950
You stay fully invested in this period…$324,019
If you jumped out of the market in 1987, and it took 12-18 months of watching the market go up to get your confidence back to invest, you would have missed the opportunity to be made whole within the next six months.
As always, stay diversified, and call us if you would like to revisit or get reinforcement of your investment strategy.
Sincerely,
Dave & Drew