Volatility is back in a BIG way and last week we saw the most precipitous decline in over a decade.
While the Coronavirus is a unique catalyst, these kinds of declines are normal market behavior... I know what you're thinking, "Normal?! How could this be normal." Well, it definitely is normal but we know it never gets easy to navigate scary markets.
All we can do during challenging periods is lean on the cold, hard, emotionless data. Here is a quick deck we put together with the help of DFA to support you and your investment decisions during this scary time.
Additionally, here are some principles you should consider.
We don't know when declines will happen.
No one has been able to accurately predict market declines consistently.... But believe me, someone out there did get this one right and they are undoubtedly trying to use this as an opportunity to grow their reputation. Don't get tempted to follow them into the future based on this one lucky win; the odds of them getting it right consistently are low.
We don't know the length of a decline
Market declines tend to be pretty rapid and rallies take a bit longer.
No one can consistently predict the right time to get in or out of the market.
If you want to try and "time the market" then remember that you needed to get out and get back in. Even if your market timing efforts had a 70% rate of success against a buy-and-hold approach, the combined probability of two consecutive 70% success rate events (i.e. the sell and then the buy) is 49%... Or roughly the same as a coin flip.