Market Corrections Matter More Than You Think

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Market Overview Analysis by Lance Roberts covering: S&P 500. Read Lance Roberts's latest article on Investing.com

During running bull markets, much commentary is written on why this time is different and why investors should not worry about market corrections. One such piece was written recently by Fisher Investments. To wit:

There are a lot of problems with that statement, which we will get into. However, there are some essential facts about markets that should be understood. First, indeed, stocks rise more often than they fall. There is little to be concerned about as 38% of the time, the market is cranking out greater than 20% returns versus just 6% of 20% or more market corrections. As Mr. Fisher notes:

During the next 12 months, the index declines by one of those rare outliers of 20%. The index doesn’t just give up its gain of 200 points.The next 1000 to 4000=300% returnNo one would argue that a 700% return on their money wasn’t fantastic. However, let’s do some math:” like Ken Fisher to coax individuals into not worrying about portfolio risk is measuring the cumulative advances and declines of the market in percentages.

At the bottom of each holding period, the bar chart shows the surplus, or shortfall, of the 6% annualized return goal.

 

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