Market declines are a natural part of the investment process.  There have always been momentous events that dampened the markets.  But history has shown that markets eventually rebound.  Maintaining a long-term perspective through challenging economic times isn’t easy, but it can be rewarding.  Historically, the “ups” of the market have consistently outweighed the “downs,” resulting in strong long-term growth opportunities.

 

Although it is important to remember that there are no guarantees an upward trend will occur in the future, history has shown that while markets react negatively to shocking events or unfavorable news, they regain value over time.  Long-term investors who have stayed invested are rewarded for their patience even after significant market declines. 

 

It is a natural instinct to “follow the herd” when the market is declining and investors are selling at a rapid pace or to “jump on” a “hot” investment on an upward spiral. Sometimes it is difficult to resist being overcome with emotion when investing.  Understanding that upturns and declines are a natural part of the market cycle can help you endure the uncertainty and avoid the temptation to react.

 

Remember, in uncertain times if you’re holding an investment that has fallen in value, you don’t actually realize a loss until you sell it.  In fact, during market lows investors may have the opportunity to expand their portfolios with quality investments at attractive prices.  Every investor should have an investment objective and a strategy.  Unless your circumstances change, to reach your goal, you should stick to that strategy.   The structure of your portfolio should be designed to take into consideration your lifestyle and diversify investment categories to minimize risk and meet needs.

 

Time in the market is what counts, not timing.  It’s nearly impossible to predict market movements.  That’s why it’s a good idea to stay invested over the long term.  Being diversified over a range of investment categories will help your portfolio weather the fluctuations of the market.  Don’t run the risk of missing a rebound by taking your money out in reaction to a drop in the Dow.  While there are never any guarantees of a quick rebound, history has shown that investors who remained invested were rewarded.

 

When market conditions are changing, it’s a good time to examine whether your portfolio is structured to manage these fluctuations.  Diversifying your portfolio across a range of investment types can help reduce risk, balance overall returns and better handle variable market conditions.  Diversification works because as some asset classes fall in value others tend to perform well.  A diversified portfolio holds a broad range of asset types, so the potential negative impact of a falling market on your overall portfolio is minimized.