When the market gives you lemons, make lemonade.

By March 9, 2016 September 23rd, 2020 No Comments

‘Buy low, sell high.’ It’s the easiest, simplest, most universally-accepted investment principle out there — and yet, it’s the hardest one to follow. Time and time again, the market dips, stocks go down, and investors sit on the sidelines only to kick themselves later on for not jumping in when they had the chance.

And of course, it’s happening again. The last few weeks have seen some surprising movement in the markets, and the trends over the last several months are suggesting a global bear market.

So, what do you do to stay true to your buy-low-sell-high mantra? My advice is to look to history. If today’s numbers are discouraging, bolster your confidence with historical data.

For instance, if you look at all the global bear markets over the past 40 or 50 years (there have been about 10), in nearly every single case, stocks were higher within five years of falling more than 20%.

Now, does this mean you’re going to turn around and make a quick profit? No.

Does this mean things aren’t going to get worse before they get better? No.

What it means is that getting out now is a certain loss, but holding on for the long run is an almost certain gain. I think this is why it’s so hard to stay the course. Looking at the present conditions and seeing opportunity is not an easy feat — we’re only human, after all.

So look away from the present for a moment. Keep your eye on past evidence and future potential, because, for the long-term investor, whether you’re buying in or just holding on, your financial well-being is far from being threatened by today’s market swings.

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