During last Friday’s session lows, the DOW Jones Industrial Index benchmark was down 536 points, which equates to a daily loss of more than 3%.
With all the negative superlatives describing or trying to explain the reasons why (take your pick – China, Oil, Currencies, Global deflation), what does an average investor do, in order to navigate these turbulent times?
We do not profess to have a crystal ball, but do know the history of prior occurrences.
We know through experience that when emotions are high, fear takes over. That’s what humans are made of. Yet we also know from our many decades of experience, headline risks will abates, and rationality returns.
In all prior cases, succumbing to emotions has resulted in below average returns for those investors that lose sight of their long term objectives.
Here are the past baker’s dozen daily sell offs since the spring of 2009. This date range is by design, as it encompasses the period where the US quantitative easing (QE) was in effect, with some suggesting it was “easy” to make money, with this extra stimulus.
We are not here to debate those points, yet you can see from this table below, there were numerous inflection points in the past that produced similar - 500 point or -3% daily losses, that would have shaken the confidence of some investors.
Remaining disciplined in conditions such as we in the present, is the key to long term success.
Dow Jones Index - Results following a Market Sell off
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