Key Points:
- The S&P 500 has fallen nearly 9% from its peak, nearing correction territory.
- Market volatility doesn’t matter as much for long-term investors. Historical data shows the market always rebounds after downturns.
- Long-term investment in the S&P 500 has always yielded positive returns.
- Market downturns present opportunities to buy high-quality stocks at a discount. Invest in strong companies to maximize gains when the market recovers.
The S&P 500 indices have taken a notable tumble recently after record-breaking highs for most of the year. The stock index has recently been down by nearly 9% since its peak in mid-July, inching dangerously close to correction territory—a fall of at least 10% from an index’s high.
Investors have been concerned about a downturn for months, and this recent dip has heightened those fears. Although it’s impossible to predict whether we are on the verge of a more significant market slump, the current volatility has many questioning whether it’s safe to invest right now or if they should wait until the market stabilizes. Market turbulence is daunting, even for seasoned investors. However, the good news is that volatility doesn’t matter as much as you might think, even if a more severe downturn is on the horizon.
The key to maximizing your wealth in the stock market is maintaining a long-term outlook. While your investments may drop in value during market dips, you don’t technically lose any money unless you sell. By holding your stocks until the market recovers, your portfolio should bounce back, likely putting you right back where you started without any losses.
Historically, the market has an incredible track record of rebounding after downturns. There has never been a crash, bear market, or correction that the market has not survived. The current S&P 500 tumble may feel severe, but historically, the index has faced far worse and become stronger.
Research also suggests there has never been a bad time to buy the S&P 500 if you’re a long-term investor. Analysts at Crestmont Research examined the index’s rolling 20-year total returns. They found that if you’d invested in the S&P 500 and held that investment for 20 years, you would have earned positive returns regardless of when you invested.
Market downturns can be fantastic investing opportunities. When the market surges, it can be incredibly expensive to buy, but as prices drop, it becomes a prime time to purchase high-quality stocks at a discount. While the market could fall further, holding your investments for the long haul reduces the likelihood of losing money. By “buying the dip” and riding out the storm, you can pay less for your stocks and reap rewards once the market rebounds.
Investing in strong stocks is critical, as weak companies may struggle to recover from economic turbulence. Market volatility can be alarming, but the right strategy will protect your portfolio. By staying calm, keeping your money in the market, and investing in quality stocks, you can survive this slump and thrive.
