Stock markets around the world have fallen over the past few months. It isn’t pleasant watching your investment fall in value. However, for long term investors in the stock market the following facts should bring some perspective to what’s happening:
1. On average, stock markets fall by 15% at some stage every year
2. Less than 20% of all downturns turn into a bear market (where shares fall by 20% or more from their peak)
3. Nobody can predict consistently if the market will rise or fall. Anyone that tells you they can is lying.
4. The greatest danger is not the market, it’s being out of the market
5. The market has historically always risen, despite short term setbacks. The advance has been permanent, the declines temporary.
6. Historically, bear markets have happened every 3 to 5 years.
7. Bear markets end and become bull markets (shares rising by 20% or more from their low).
8. Share price volatility (prices rising and falling) is a normal feature of the market. Once we understand this and accept it, investing in the market is a lot less stressful.