In fact, it’s a good thing. Really.

How can a down market be good? Well, without down markets, we would not have much of an up market. Stocks have averaged about 10% forever. And that’s more than cash, bonds, commodities, CDs, gold and other metals, annuities, currencies, collectibles, and just about anything else. But for that long-term reward, we must absolutely experience some short-term suffering. They are inextricably related. Anything said to the contrary is either a sales pitch or a lie. And all the evidence tells us that attempting to maneuver around times like this will likely result in even lower returns.

October has been a terrible month. And because of it, the whole year isn’t much better. The recent yellow block on the graph below shows us that. But take a look at the other yellow blocks. They all came, and it hurt…and they all went. But only those who persisted and stayed the course were rewarded. Never forget that.

While we hope you’d never revel in someone else’s failure, you should be proud that, unlike so many others, your patience will make you a winner. It’s no small feat.

Cheers,

John & Bill

About this graph:

Two things are clear. First, long periods of no growth are common, and varied in length. Shorten the qualification to four months of no growth, and we see fifteen periods of no growth, covering 139 of the 262 total months. That means that for the last twenty-two years, one’s investment experience was significantly flat or down 53% of the time. Second, and more importantly, since we know through academic evidence that no one can predict when these flat or down periods will begin or end, the key to realizing the reward is patience and discipline.

It’s certainly not easy to wait, to be patient. When we discuss investing, we talk in terms of five years, ten years, twenty years – never five days, or ten weeks, or even twenty months. But months of no growth can seem like an eternity. We tend to live our lives day to day. Many of us look at our investments the same way. But investment goals should be formulated and measured in years, if not decades. Dealing in days, weeks, months, or even a few years is not investing – it’s gambling. And as this chart clearly shows, being patient throughout those years is absolutely necessary for investing success.