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More Ups than Downs [Charticle]

Sudden and significant market sell-offs such as the one recently experienced may initially be alarming and disconcerting to any investor. However, it is important to keep the following in mind:
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STANDPOINT

Market drawdowns and subsequent returns

Markets have gone up more than down

Sudden and significant market sell-offs, such as the one recently experienced, may initially be alarming and disconcerting to any investor. However, it is important to remember:

 

1. Recoveries follow sell-offs: 

Market sell-offs have always been followed by a market recovery.


2. Buy low and sell high: 

Market declines are often the forgotten part of the investment cycle. While unnerving in the short term, these times provide an attractive entry point for longterm investors.


3. Don’t miss an opportunity: 

The sharp recovery from the bottom in March (whether it is sustained or not) clearly shows the risk of crystallising losses if moving too quickly out of the market during periods of uncertainty – as tempting as this may be.


4. Beating inflation over the long term: 

Growth assets, such as equities, tend to outperform more defensive assets over the long term, and provide a good hedge against the corrosive effect of inflation.

 

 

This article appears in the Q2 June 2020 edition of our StandPoint publication. Click here to download a copy of the full publication.

 

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