What Goes Up Must Come Down - or Does it?

One little known fact about me is that that I’ve actually had first-hand experience with our last two stock market crashes. First, as a young investor during the dot.com bubble. Second, as an advisor during the 2008 financial crisis.

As we’ve reached stock market highs recently I’ve been thinking a lot about our last recession. At that time we saw a peak of the DJIA, (“the Dow” and the typical benchmark used when you hear a reference to “the market”) on October 9th, 2007 and a bottom on March 6th, 2009. By that time it had lost over 54% of its value. So if someone bought into an investment tracking the Dow on October 9th 2007 their investment would have been about half that value on March 6th, 2009.

Now here we are nearly a decade later in one of the longest bull markets in US History, which makes it a great time to take inventory of your investments. As you review your accounts I recommend that you confirm that your portfolio is still in line with your investment strategy. Research shows that many investors have tendency to buy into the market when things are going well and sell off when markets are low. So psychologically our tendency is to buy high and sell low. Yes, you read that correctly buy high and sell low.

So if we hopped in our time machine and took a look at the average investor back in 2007 many would have been inclined to invest in the US stock market and US real estate market. If they let their emotions drive their investment decisions it would’ve felt like a great time buy. By March of 2009 many would have reached a breaking point of wanting to sell it all off and again letting emotions drive their investment strategy.

I don’t have a crystal ball so I can’t tell you exactly what’ll happen to the stock market or our economy. BUT if I look over the next decade history tells me that there’s a strong chance that we may see another recession and market downturn followed by an eventual rebound. We’re not there yet so now’s a great time to revisit your investment plan to make sure that you’re making your decisions based on sound strategies, not emotions.

What does your investment strategy look like? Are your emotions part of the equation? Or

maybe you’re unsure? CLICK HERE to see if we can help provide a second opinion.

The views expressed today are my own and do not necessarily represent the views of my broker/dealer, The Investment Center, Inc. or my Registered Investment Advisor, IC Advisory Services, Inc.

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