We don’t have to look too far back in history to find context for the volatility we are seeing in today’s markets. In fact, the financial crisis of 2008 presented much more dire circumstances for the financial markets, where our financial systems shook the global economy to its very core.
From 2007 to 2009, the S&P 500 fell 57%, a mark only eclipsed by the Great Depression in the early 1930s. While the financial crisis of 2008 created historically high levels of volatility in the markets, history shows us that times of dramatic loss are the rule, not the exception for long-term investors.
On average, events like Brexit, global trade wars, the Ebola outbreak in 2014, and the coronavirus pandemic we are experiencing today, cause 20% declines every 6 to 7 years. In other words, strictly from an investment perspective, the financial consequences from COVID-19 for investors fall in line with how the markets have historically performed.
Of course, it’s one thing to look back on history and see that patience pays off in the long run for investors. However, it’s quite another to actually be living and investing through the volatility, fear, and stress.
Trying to time the market by selling when things get tough and buying on the upswings will ultimately work against you. Practicing Dollar-Cost Averaging and keeping your eye on the longer-term and bigger picture will pay dividends, both literally and figuratively.
Past downturns should provide a bit of clarity and even comfort for worried investors. Half of all bear markets since the Great Depression took less than a year to fully recover from for investors.