As of the writing of this post, the stock market has declined around 10% due to the Coronavirus scare. This level of loss is called a market correction. It is easy for investors to be scared and wonder when this will end.
At times like these, it is important to not let fear impact investment decisions. Declines, even significant declines, during the year are not usual. These declines are all triggered by something bad, like this one is being triggered by the Coronavirus. Take a moment to look at the chart below and look at the returns of the S&P 500 each year in gray. Most years have positive returns, but all years have declines in the market as indicated by the red numbers. What we are seeing this week is not totally out of the investment ordinary.
So what is an investor to do? I had a meeting today with four of the portfolio strategists that we utilize for our clients. Each one had varying predictions of where things may go, but they all agreed that the best course of action is to stay the course with an appropriate investment strategy. It is best not to sell and get more conservative when markets decline, as markets tend to turn around quickly and those who get out keep their loss but miss a recovery from their loss. That is the main story of the chart above. Hold on through the dips that are sure to come and experience returns long term, and many times in the same year of the dip.
I am not an expert on disease, so I don’t know when the Coronavirus will be contained and under control. However, it is likely that this will happen, and when it does, whether in days, weeks or months, the stock market will likely roar back if the economy continues to grow.
In closing today, I recommend you view the other posts about the Coronavirus for more pertinent historical information.