In light of the recent market activity, Devin and John thought it would be useful to re-broadcast their original episode on the lessons they’ve learned from past market declines.
If anyone says that they don’t make mistakes, they’re probably not telling the truth. Devin and John are no exception! Today, Devin talks about market declines, the mistakes he’s made, and the lessons he’s learned.
Lesson 1: Market declines are normal.
The market goes up and goes down; that’s just what it does. There are many statistics that show how often the market has significant declines, including a 10% drop happening an average of once per year.
Lesson 2: No one can consistently predict market movements.
Timing the market is a bad idea. So-called experts are statistically wrong more often than they are right, and to successfully time the market, you have to be right about getting into the market and be right about getting out of the market.
Lesson 3: The best days hang out with the bad days.
Pulling out of the stock market immediately after a bad day means that you’re going to miss out on the likely rebound. You can’t afford to miss the good days, because missing even a few good days will have such a huge impact on your overall returns.
Lesson 4: This time is really not different.
A particular situation may be different, but having different situations is not unique.
Lesson 5: The greatest threat to your portfolio return is your emotions.
Letting your emotions cause you to try to time or outsmart the market will cause you to make poor decisions.
Plus, Devin and John talk about how your investment advisor should react to market declines.
Resources mentioned in today’s episode:
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