Perspective

The stock market has hit a rough patch over the last couple of months and that has intensified over the last couple of weeks… Just some quick charts on what’s happened since the March 2009 bottom in the stock market for perspective:

Seeing stocks pull back 10-20% from highs is completely normal from a historical perspective. It’s also not predictive of what will happen in the near term future. Stocks could go sharply lower from here, could flat line, or could snap back to new highs. The volatility inherent in stocks, especially over a short period of time, is the price you pay for the long-term expected returns that stocks have historically provided. Any equity investor has to be prepared to lose 50% of their portfolio’s equity holdings at any time in return for those long-term expected gains. As long as money that’s needed for the short-term isn’t primarily in stocks, losses on that money will be muted. For money that’s invested for the long-term, as long as it really isn’t needed until the long-term, short-term performance is not relevant (sign up for the roller-coaster when you invest and hang on during the ride).

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