Your Monthy Financial Update

Market fluctuations are not much of a surprise lately, considering current events.  However, it is important to keep these changes in perspective as they are not unusual circumstances but very normal occurrences in the stock market. 

The good news is that every time the market has gone down, it has come back to reach new highs.  Since 1950, there have been ten bear markets, defined as a drop of 20% or more from the market's previous high.  During these bear markets, stocks have fallen an average of 34% and gained an average of 136% in the subsequent bull markets (does not include the current bull market).

You may be saying to yourself, “this is all well and good but if we go into a bear market, its just going to be too risky for me to stay invested.”  It is important to remember that keeping that long term perspective is what is going to make your money grow. 

Here’s a good example of showing how staying invested during turbulent times may be beneficial.  If you were fully invested in the S&P 500 over the last 20 years (July 1, 1992 – June 30, 2012) your return would have been  8.34%, however:

•             If you were out of the market during the top 5 months of those 20 years, your return would have dropped to  5.89%.

•             If you were out of the market during the  top 10 months of those 20 years, your return would have dropped to  3.83%.

•             If you were out of the market during the top 15 months of those 20 years, your return would have dropped to 1.99%.

•             If you were out of the market during the top 20 months of those 20 years, your return would have dropped to .43%

Every day you are absent from the market may make a difference in your return.

Why do we invest in the market?  To help our money grow.  To do that, it takes time in the market and it takes some patience.  So remember this during the downturn:  Time is on your side.

*S&P ChartSource 2012

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