Bear markets are a gift to long-term investors, and should be viewed as an opportunity rather than a setback.
Bear markets are most difficult for investors who are near retirement or already retired, but it helps to “zoom out” and take a 30,000-foot view when thinking about your investment strategy. What appears to be a sizeable loss is often just a blip on the radar over a lifetime of investing.
Investors who have been in the market for some time can be more resilient because they’ve had many years of positive returns, which provide context to their current situation. For example, if you started investing in 2007 and were invested in stocks throughout the 2008 financial crisis, it would have been quite stressful to watch your portfolio lose nearly half its value over 6 months. However, looking back at your portfolio over 15 years (since 2007), it is likely that your portfolio has more than recovered all of those losses.
Specifically, the S&P500 has more than doubled since the “high water mark” in 2007, and that does not even take into account the dividends you would have received during that time. This figure does take into account the Great Recession from 2007 – 2009, the “COVID crash” of 2020, and the current bear market of 2022. Moreover, prior to the bear market of 2022, the S&P500 index more than tripled from 2007 until late 2021. As of October 2022, the S&P currently stands at a value over 5x higher than the market bottom in January of 2009.
No one can consistently identify exact tops and bottoms in financial markets, which further emphasizes the importance of maintaining a long-term focus and riding through the volatility. It may be unsettling to watch your portfolio swing wildly during times like these, but in the long run, investors have historically been handsomely rewarded for exercising patience and trusting that “time in the market” is likely to be a more successful strategy than “timing the market.”