Boy have the markets been on one heck of a run! Information provided by Yahoo finance showed that annualized gains from the S&P 500 was over 10% within the last 8 years. And not only that, it was able to reach these monumental heights with very little volatility. Because of this bull market, many investors feel safe and have forgotten that what goes up must come down. Believing that passive index funds are safe and will continue to grow money for their lifetime is not what should be happening. Don’t get caught in this false sense of security!
While 8 years of good returns is a long time, it shouldn’t make us ignore or ease fears of the looming return of the bear market. People can and will lose money in the market, sometimes quickly. And even though it wasn’t too long ago, some people have forgotten the devastating losses of the overall markets between August of 2000 and September of 2002, and October of 2007 and February 2009. During both those times, the S and P 500 lost roughly 50%. Even today with most of the indexes fully recovered, some people still haven’t completely recovered from those losses.
Realistically, sustaining a 10% annual passive index return forever isn’t going to happen. We are currently in the second longest bull run in history which means we may be nearing the end and should expect a major market correction. This can mean losses. Are you ready?
What steps should you take? There are passive routes where you continue to invest in the general market index or you can go the more conservative approach and go into protection mode. Or maybe you want to go into an adaptive state according to market conditions? Lastly, can you do all of these?
Join me on the podcast to find out all these answers.