{"id":2962,"date":"2015-09-25T18:52:38","date_gmt":"2015-09-25T22:52:38","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/are-you-making-a-big-mistake-in-these-volatile-times\/"},"modified":"2022-02-26T13:23:03","modified_gmt":"2022-02-26T13:23:03","slug":"are-you-making-a-big-mistake-in-these-volatile-times","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/are-you-making-a-big-mistake-in-these-volatile-times\/","title":{"rendered":"Are You Making a Big Mistake in These Volatile Times?"},"content":{"rendered":"

Stock market volatility continues unabated. It may be too early to tell, but I\u2019m marking the top of this current market correction at July 20, with the bottom still to be determined (though I\u2019d say it\u2019s still a few weeks off). Since July 20, investors have had a rocky ride with the market having traded down 1%, or more, in 10 of 45 trading days (through September 22). Quick math indicates the market has fallen over one percent 20% of the time in the last two months. That sure feels like a lot.<\/p>\n

In this pronounced patch of volatility, investors are constantly tempted to sideline their portfolios (wait in cash) to let the market cool before recommitting to stocks. I\u2019d guess that in each of those 1% or more down-days, a slew of investors headed for the exits, selling equities with the intent of \u201cwaiting it out.\u201d In my view, that\u2019s a mistake.<\/p>\n

Maintaining Perspective and the Dangers of Bad Timing<\/strong><\/p>\n

Indeed, history tells us \u2013 time and again \u2013 that such a move is often ill-advised and costly. Downside volatility is not only common in bull markets, it\u2019s often been worse than what we\u2019re seeing today. Headline grabbers like this one from August 24 stating \u201cAfter Historic 1,000 Point Plunge, Dow Dives 588 Points to Close\u201d can freak-out even seasoned investors. \u201cHistoric Plunge. Dow Dives.\u201d <\/em>Makes one queasy. Reality: the market (measured by the S&P 500) fell 3.94% that day \u2013 hardly its worst day in history \u2013 and, it is positive since then.<\/p>\n

Think about it: the market is positive since then. <\/em>You simply will not see this narrative in the news because optimism doesn\u2019t sell. But, that is the perspective most investors need to \u2018stay cool\u2019 when the \u2018heat turns up\u2019 to keep their eye-on-the-prize for the longer term outlook (which I still believe is positive for stocks).<\/p>\n

Instead, many see current market volatility as unprecedented, because it\u2019s easy to forget historical patterns. But, it\u2019s simply not unprecedented and, in fact, it\u2019s rather \u2018light\u2019 so far. Here are a few factoids to help keep us grounded:<\/p>\n