You know those swimmers that go in slowly.
Their idea of taking a dip is moving inch-by-inch into slightly deeper water, as the body tingles uncomfortably for the 23 minutes it takes to arrive at full immersion.
The stock market is not like that.
Sometimes it’s more akin to the obnoxious relative that comes out of nowhere screaming joyfully and tackling or dragging the slow dipper into the frigid waters immediately.
Investors must know this is how investing works.
Markets can move fast.
The question is: how will you react when it does?
Investors had a small test of that recently.
After a phenomenal first half of the year on Wall Street, the stock market took a dip. We experienced one of the most volatile days in the market that we’ve had in some time, and a few weeks later one can hardly tell it happened.
Amazing what one month can do.
Look at the above chart showing July 15th to August 15th on the S&P 500 and Nasdaq.
Eddy Elfenbein recapped the last few weeks:
The S&P 500 has already gained back three-fourths of what it lost. The market is now a little over 2% from a new all-time high…
In retrospect, the downdraft lasted just 14 days. From July 16 to August 5, the S&P 500 lost 8.5%, but those losses were very concentrated. Over three consecutive days, the market fell 6%…1
Volatility is normal. You cannot—or rather, should not—be an investor without embracing this reality. In order to reap the reward of long-term investing, you need to hang around during volatility. This has been the continual lesson of the United States stock market.
It is also why one of our biggest jobs as financial advisors is not helping people time market volatility just right, but helping people manage their own internal reactive volatility to the markets ups and downs and developing an investment plan.
If you know someone who needs help, send them our way by having them click “Talk to an Advisor”.
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Sources:
- Email from “CWS Market Review - August 16, 2024”.