When it comes to investments, it is often hard to look at the long-term picture. When markets are volatile, the short-term view often takes precedence. But in the long-run, investors should be taking a step back and truly evaluating the current market pullback in the context of a longer-term plan.
Recently, the stock market has been in full correction mode, with the S&P 500 and Dow Jones Industrial Average having dropped more than 10 percent from their all-time highs in October. This has caused a lot of investors to panic and wonder what’s next.
But if you look at the historical context of corrections and market pullbacks, this has actually been a fairly common occurrence. Since the early 1970s, the S&P 500 has experienced 19 corrections ranging from -5.5 to -19.8 percent. So while it may feel scary, it is important to take this market pullback in the context of a long-term investment strategy.
The most important thing to remember is to adhere to your long-term goals and remain disciplined with your portfolio. Now may be a good time for investors to take a closer look at their investments and determine if any tweaks or adjustments should be made. Consider diversifying, rebalancing, and buying undervalued investments–all tactics you can employ to take advantage of the current market climate.
Ultimately, it is important to step back and take a longer-term perspective when the market seems to be going through a tumultuous period. Many investors find that these corrections are actually a normal part of the market cycle and something that should be managed from a risk management perspective. By keeping a clear head and understanding the historical context of such pullbacks, investors can come out on top.