Periods of Consecutive Negative Stock Returns
Periods of Consecutive Negative Stock Returns
Ceasing regular investments during market downturns can sometimes deprive you of future opportunities.
The image illustrates that since 1926 there have been four times when the market failed to reach returns above zero for two or more consecutive years. In all four instances, negative returns have been followed by above-average positive returns. This pattern is not guaranteed to repeat itself, but it illustrates the market’s potential and one of the reasons to stay focused on your investment plan.
Things To Know
- Investors must have discipline and patience.
A disciplined investment approach is still one of the best strategies for handling market downturns. This includes maintaining a well-diversified portfolio and using dollar-cost averaging, instead of lump-sum purchases, to ease into new investments. Finally, staying focused on a long-term investment plan may enable investors to participate in recoveries.
Diversification is not a cure-all
Diversification does not eliminate the risk of investment losses. Dollar-cost averaging does not ensure a profit or protect against a loss in declining markets. Dollar-cost averaging involves continuous investment regardless of fluctuating prices, so investors should consider their financial ability to continue purchases through periods of low price levels. Stocks are not guaranteed and have been more volatile than other asset classes.
About the data
Stocks are represented by the Ibbotson® Large Company Stock Index. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs.
